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the fbi and the bookie
FROM A NUMBERS RUNNER IN BORNEO TO the biggest bookmaker in the world, paul phua finds himself in the crosshairs of the justice department
THE UNKNOWN KING of international gambling employs a lively step. He tiptoes through U.S. District Courtroom 3D in Las Vegas, having danced out of similar situations before.
It is Aug. 5, 2014. Paul Phua approaches the lectern in Magistrate Judge Cam Ferenbach's walnut-paneled courtroom. He wears a charcoal-colored suit, white shirt and no tie, a pair of glasses lending him an expedient air of frailty. As Phua enters his plea, the right hand of his attorney soothes his shoulders.
"Not guilty, your honor," Phua says, his voice a whisper. But anyone who has joined him at a World Series of Poker (WSOP) table would recognize his expression of quiet confidence.
In this city of deception, who still falls for illusions? Paul Phua, this modest figure, is the biggest bookmaker in the world. For years, Phua has navigated the globe in an ultra-long-range business jet, its tail designation -- N888XS -- a nod to the Chinese belief in lucky number eight and the overindulgence that often accompanies a gambling windfall. With billions of dollars reportedly at hand, Phua has erected a gaming empire, touching down in Hong Kong, Las Vegas, London, Melbourne and anyplace in between where there are casinos, nosebleed poker games and gamblers ready to place max bets on the world's most lucrative sporting events.
Now Phua has landed in a place -- U.S. federal court -- where his status as gambling kingpin can only work against him. The FBI, with guns drawn, raided Phua's villa at Caesars Palace on July 9 of last year, during the 2014 WSOP. The Department of Justice alleged that Phua and seven others ran an illegal sports betting enterprise, a "wire room," in the parlance, handling nearly $400 million in illegal wagers on last year's World Cup.
Each charge -- operating an illegal gambling business and transmitting wagering information -- carried a seven-year maximum prison term. But as grave as breaking U.S. gaming law might have been, the case against Phua was about more than taking chits on soccer games. It is indicative of the U.S. government's increasing concern over how, and from where, money flows into Las Vegas and the U.S. financial system.
Since Phua's arrest in July 2014, ESPN has conducted more than 80 interviews in eight countries and examined thousands of pages of court filings, which tell the story behind the Caesars raid, involving many high-profile players: the world's biggest poker stars, Wall Street investors, Chinese criminal figures, an All-America basketball player-turned-financial-crimes crusader and the former head of Interpol, each looped into a mystifying, multibillion-dollar shell game.
At the center of it all is Phua (pronounced "Pwa"), an unassuming 51-year-old Malaysian and the reputed principal owner of the world's largest sportsbook, IBCBet. Phua, who declined requests to be interviewed for this story, was the reason that poker savant Tom Dwan was learning Mandarin and that poker megastar Phil Ivey was frequently spotted at the StarWorld casino in the Chinese gambling enclave of Macau. According to the Department of Justice in court filings, Phua was a senior member of a Hong Kong criminal group known as the 14K triad (Phua's legal representatives dispute the allegation); testimony under oath also indicated that Caesars was suspicious of funds he had transferred inside its properties.
What follows is the story of Phua's rise from a Borneo numbers runner to the biggest bookie around -- as well as the most powerful figure in poker. And how the FBI finally hooked him, only to watch him walk away a free man.
WHO IS PAUL PHUA?
When the U.S. government impounded Phua's $48 million Gulfstream V jet as part of a bail agreement, Phil Ivey picked up a good portion of the rest ($2.5 million) to spring Phua and a fellow defendant. Ivey's generosity aroused speculation: Just who was Paul Phua? A collection of associates, investigators and gambling executives relate the following details.
Wei Seng "Paul" Phua was born in the town of Miri, on the island of Borneo, in Malaysia. As an adult, he ventured across the South China Sea to Kuala Lumpur, the Malaysian capital. Phua started working construction jobs, but he quickly found more lucrative surroundings. "When he was in Kuala Lumpur, he mixed around with small-time Chinese gamblers in the Chinese coffee shops," says an investigator from Malaysia's D7 squad, a division of the Royal Malaysian Police Crime Investigation Department, which is tasked with combating gambling, vice and organized crime. Phua learned how to set lines on soccer games, eventually becoming a bookmaker. "His reputation started growing by word of mouth," the investigator says.
Phua was rising through the sports betting business at a moment, the late 1990s, when the industry was about to undergo revolutionary change. Bookmaking had always been a local activity, with bookmakers marketing to clientele from whom they could collect in person. Internet-deployed technology was allowing bookmakers to reach across international boundaries, marketing their services to a global clientele. A fortunate few bookies would emerge from the mass of Asian sportsbooks and build name brands. Transformation would require capital investment into IT. Phua happened upon a scheme that would secure the financial wherewithal to harness this innovation.
In 1997, soccer officials suspended two English Premier League matches -- West Ham vs. Crystal Palace and Arsenal vs. Wimbledon -- after the stadium lights lost power. Each match had entered the second half, so by the rules of Asian bookmaking, bets on these matches had to be paid based on the score as it stood. The games came to be known among international bookmakers as the Floodlights Affair, the first confirmed incidence of Asian-backed match-fixing on English soil.
A stadium security guard and three Asian men -- two Malaysian nationals and a Hong Kong native -- were found guilty of conspiracy charges related to match-fixing. Phua was never linked to the crime or charged during the proceedings; however, multiple sources close to him tell a different story.
"Paul Phua financed it," says a Phua associate. "If you know the outcome of a Premier League match, you can make an absolutely enormous amount of money. This money allowed Paul Phua to go from being one of the top eight or so bookies in Malaysia to being absolutely massive."
With new capital, Phua funded the IT development that placed his sportsbook -- now called IBCBet -- online and at the vanguard of industry technology. It ultimately became the de facto line setter in Asia. Like others in the industry, he recruited an international network of trusted agents and subagents who drummed up business in dozens of countries, say longtime agents and a former executive of IBCBet.
Along the way, Phua partnered with Seng Chen "Richard" Yong, a regular in the Kuala Lumpur gambling scene who the Hong Kong police confirm has been convicted for fixing horse races. Yong had contacts throughout Asia, and as Phua looked to expand IBCBet, Yong helped him move his operation first to Ho Chi Minh City, Vietnam. IBCBet would eventually be registered in the Philippines, among the few Asian jurisdictions where online sportsbooks remain legal. According to trade estimates, IBCBet handles roughly $60 billion of betting per year. With a 1 percent take, the book clears $600 million annually. An IBCBet source in Manila says Phua owns 70 percent of the enterprise.
"He is a hell of a risk taker," says a Macau casino executive who has known Phua since the early 2000s. "He went bankrupt twice in his career. The first time was in Malaysia. The second time was slightly more than 10 years ago in Hong Kong, Macau. There's a rumor that he did the infamous English Premier League lights-switch-off case. That's how he saved his ass the last time. He's a guy who can pull things like that off."
Although Phua's book expanded globally, he was never far from home. During the Euro 2004 soccer championships, Malaysia's D7 police squad tracked intense illegal betting activity to a condominium at the Miri Golf Club, in Phua's hometown. In the early hours of July 5, officers approached the condo. Portugal and Greece had just kicked off in the Euro final, and police cut the condo's satellite TV cable. When a man exited the condo to check the cable, D7 agents pounced.
Police discovered a wire room with 22 men -- from Vietnam, Hong Kong and Macau -- working banks of computers. They made an additional discovery: Paul Phua.
Authorities shut down the illegal operation, and according to the arresting officer, they fined Phua roughly $8,000 and drove him to the airport, where he boarded a flight to Vietnam. The bust didn't impact Phua. But it was a sign, had Phua been one to acknowledge it, that international law enforcement was taking an interest in the game he was playing.
MADE IN MACAU
The ferry cuts across the Pearl River Delta from Hong Kong, launching off the surf of an approaching monsoon, slamming into the downslopes, windowpanes rattling. The lights of Macau glow from the coast. In fire-orange blaze, the word "Sands" is scrawled across the broadside of one of the city's largest casinos. It was through this property that Phua gained the prominence that would make regulators in Nevada take note of this new player.
Vegas slick has transformed Macau, a town of 11 square miles on China's southern coastline, into the prime mover of international gaming. Las Vegas Sands was the first American casino to open here, in 2004. Then came Wynn Resorts, then MGM Resorts International. Sheldon Adelson, the chairman and CEO of Las Vegas Sands, stated that he recouped his initial $260 million Macau investment within eight months of operations.
Phua provided a key to this boom. A symbiotic relationship has always existed between casino gambling and sports gambling -- Phua's clientele was hooked on action, not just on sports. When the Macau Sands opened, according to a casino executive at the time, Phua, with another Hong Kong partner, directed his VIP gamblers toward Adelson's new operation for a percentage. Phua and his partner eventually established Sat Ieng Company Limited, a junket company, which brings mainland Chinese high rollers to Macau and extends them credit.
Phua became a regular presence on the Macau nightlife circuit. He would play Liar's Dice -- a game of deception and bidding -- in Macau nightclubs. Phua wouldn't bet for drinks, as was customary, since he didn't consume alcohol. For him, it was always high cash stakes. "He bets on everything," says one Macau casino executive, who says Phua was known for risking tens of millions of dollars at a time on futures and securities. "In the early days in Macau, he would go out with eight black-suited bodyguards to nightclubs. Which is a no-no, which really attracts attention."
When Adelson's Vegas rival Steve Wynn opened the $1.2 billion Wynn Macau casino, he naturally offered Paul Phua a 0.1 percent increase over his Sands commission of 1.1 percent to also funnel gamblers to the Wynn, according to reports in the South China Morning Post. In the year that Phua signed with Wynn, Macau casino revenue grew to $6.95 billion, making it the world's largest gambling market. By 2013, Macau's annual gaming revenue had grown to more than $45 billion. This growth -- which Adelson and Wynn publicly fronted -- was propelled in part by Phua, who for the moment remained unknown to those located anywhere but at the center of the industry. (Wynn's and Adelson's companies declined comment but have denied any association with organized crime in the past; both have partnered with junkets, including those owned by Phua.)
"Sands proved that there was huge demand in the market," says Adam Rosenberg, a former head of global gaming for Goldman Sachs' investment banking division, who is now the managing director of gaming and leisure at Fortress Investment Group. "Analysts realized that Macau had transformed from a small, risky market into a place of enormous growth."
As it did so, Phua's wealth and reputation expanded. "Everyone's nervous about talking about him," says a Macau casino executive. "Usually these guys like to brag about who they know, how close they are to these big hitters. But with Phua, they all say, 'Hey, you don't want to mess around with this guy.'"
Macau is full of tough guys, real and self-imagined. After Broken Tooth Koi, the former head of the 14K triad, was released from prison, in 2012, he joined Phua for dinner. The encounter, photographed by intelligence operatives, fed rumors that Phua himself was a high-ranking 14K figure. "He has triad connections," says a Macau casino executive. "He's rich. He's not a triad. Any rich man who knows a lot of triads here can cause harm to you if you say something that they don't like."
And this is why Macau itself would always be a risk for investors, since its growth was inextricably linked to organized crime. Macau's biggest clients -- by a staggering margin -- came from mainland China, where it is illegal to operate a debt-collection company. The junket companies relied on Chinese criminal groups -- the triads -- to collect player debt on the mainland. Without the junkets, there would be no Macau boom. Without the triads, there would be no junkets. Partnering with junkets and major junket figures such as Paul Phua -- as the Western casinos realized was essential to doing business in Macau -- suggested partnering with triads.
Eventually, the U.S. Treasury Department grew curious. While Washington quietly began scrutinizing Vegas operators in Macau, Phua was none the wiser, fueling his own intense personal gambling habit at the enclave's baccarat tables. A new card game would soon come to his attention, drawing Phua from the shade.
HIGHER STAKES, HIGHER STACKS
Baccarat, a game of chance, has long been king in Asia. Poker's reliance on strategy opposed the Chinese faith in luck. No Macau casino even offered a poker table.
But in 2008, a gaming company, AsianLogic, purchased the Asian Poker Tour (APT). Tom Hall, an English-Chinese bookmaker from Hong Kong, owned a stake in AsianLogic, and he held a position at a coding company that had contracts with IBCBet. "Paul and Richard [Yong] were the biggest whales in the world," Hall says. "They were losing $30 million to $100 million every year on baccarat. I said, 'Hey, you guys should try poker. You can play other players, instead of losing to the house.'"
They didn't know how to play. In Macau, there was no one to teach them. Phua and Yong gathered a small group of associates for regular games, these experienced gamblers teaching themselves this new game as they went along. "That first year, if you won, you had to show your hand," says Hall, who had a seat at the table. "People began to understand how to bluff." Having gone some distance in understanding poker, they were now ready when the game would come to them.
In 2010, Hall traveled to Las Vegas. There he mixed with top players, including a couple of guys from New Jersey: Tom Dwan and Phil Ivey. A perplexing player who competed mostly online, Dwan danced the edge between genius and fool, playing hands that others would ordinarily discard. Ivey has won 10 WSOP bracelets and more than $22 million in casino winnings. Hall told them about a table in Macau stocked with fresh fish swimming in liquid stakes.
The Macau APT tournament began on Nov. 6, 2010, at the City of Dreams casino. Dwan entered play, but he and Ivey were more concerned with Phua's private game. "That first table was Ivey, Paul, Richard, Dwan, Johnny Chan, John Juanda, Chau Giang and myself," Hall says.
Matt Savage, who administered the APT event, wrote about the big table on 2+2, a poker portal. He mentioned "some Chinese businessmen" and extraordinary pots. Savage went on to write that "there was about 40 million on the table last night when I saw the game. When I asked Dwan when he was moving here he said, 'very soon.'" By the time Dwan left Macau, he had won, by several estimates, $9 million. The same amount was awarded to the winner of the WSOP main event -- a 10-day slog.
The Macau table appeared at a critical moment. Online poker remained the primary venue for lucrative pots. In 2011, a federal judge unsealed an indictment in a $3 billion case against PokerStars, Full Tilt Poker and Absolute Poker, the largest U.S. poker sites. The case alleged that these companies had violated the Unlawful Internet Gambling Enforcement Act. The government shuttered the sites, freezing their funds. Many players maintained accounts with these companies, some running into the millions of dollars. That money was gone, along with the U.S. online poker industry.
The effect on the poker community, which refers to that day as Black Friday, was instantaneous. "All these online players became live players, flooding the casinos," says Justin Smith, who has three WSOP final table appearances. With an increasing number of states legalizing gambling, players didn't have to travel to Vegas, causing the size of pots on the Las Vegas Strip -- and everywhere -- to dwindle. "Immediately, players starting looking for other countries to play in," Smith says.
Macau was far, a whole day by plane from the U.S., with crippling connections. If you could get a seat at Phua's table, however, the trip was worth the hassle.
Today, the poker community regards Phua as a deep-pocketed, high-amateur player. But during the aftermath of Black Friday, he was a whisper. Accessing his table at the Starworld Casino was a waiting game, which played out across Avenida 24 de Junho at the Wynn Macau poker room. There weren't just American players there. Pros from Australia, Norway, France and Israel mixed at the Wynn.
Even there, the action was serious. "The smallest game I played at the Wynn was two and a half times bigger than the biggest game I'd play in the U.S.," says Greg Merson, the winner of the 2012 WSOP main event. "You need to take $200,000 at a minimum. All the biggest games shifted over there for no-limit."
While the Wynn action was bigger than most players had ever seen, these weren't the stakes the pros had come for, nor the opponent pool. They weren't interested in butting heads with one another. They could do that in tournaments back home, and for prize money scores and TV exposure. They had traveled this far to face amateurs with tall stacks, people who played poker for distraction.
"It's hard to predict when the action is going to be good there," says Sam Trickett, an English player who has won more than $20 million in tournament play. "You have to wait for businessmen to show up. You have to be there and sit it out, be on call."
Players booked apartments. They bunked in at the Mandarin Oriental near the harbor. They played pool during breaks, baccarat to pass the time. The lucky ones would get a call from Winfred Yu, a Chinese-Canadian who assumed administrative control of the big table. "There's a good chance there's going to be a game this week," Yu would say, mentioning a "businessman" or two who were taking the chopper from Hong Kong.
The buy-in could be as low as $130,000 or as high as $1.5 million. Sometimes there would be no blind at all, just a $13,000 ante. Pots often grew to $5 million. Players used lacquered square plaques in a $100,000 denomination, stacking them like office towers.
Meanwhile, Phua and Yong, poker naïfs, were learning more than just the cards. Players routinely agreed to split their earnings with a backer, especially when entering tournaments with substantial buy-ins. As the action shifted to Las Vegas for the 2012 WSOP, risk-taking players like Dwan required backing from whales like Phua and Yong to enter the richest buy-in in poker history.
The Big One for One Drop was poker's first $1 million buy-in. Its final table included two Poker Hall of Famers, two winners of the WSOP main event and four holders of a WSOP gold bracelet. There were two newcomers: Phua and Yong. "We didn't know who they were," says Seth Palansky, the vice president of corporate communications for Caesars Interactive Entertainment. "The World Series of Poker had to list them somehow. We came up with 'Asian software developers.'"
While Yong reached the final One Drop table, finishing eighth, for $1.2 million, Phua lost early. Two months later, however, Phua entered a 100,000-pound no-limit Texas hold 'em tournament at London's Aspers Casino. Just three years after picking up poker, Phua won the event, cashing out for $1.6 million. Back in Macau, at his table stocked with handpicked, wealthy amateurs, Phua's stacks continued to grow.
"Paul Phua is, by far, the biggest winner at poker in the world," Hall says. "A couple years ago, he had a problem with a Swiss bank. They wanted to know where all the money was coming from. We had to show the bank security-camera videos of Paul playing poker before they finally believed us."
While Phua maintained a detached table demeanor, Yong roiled the scene. At a 2012 $50,000 WSOP buy-in in France, Yong arrived at the table wearing leopard-print pajamas, leading another player to coin the term "pajama-rich." Later in Paris, Yong employed a woman to feed him fruit during play. The poker circuit had taken to calling the pair "the Asian businessmen."
It was unclear to the poker community what this business might have been. The only substantiated fact was that Phua and Yong had instigated poker's financial revitalization. Now that the Asian tables had pushed global stakes higher, cash games had become what tournaments had always been, an opportunity for a big score. And tournaments now all but required backing, since the buy-ins had soared to attract these new players who entered events only if the numbers could hold their attention.
The Asian cash-up left the game's governors with a challenge at a time when the U.S. government was tightening regulation. "Before the Big One, we never had to deal with where the money came from," Palansky says. "Now an unfathomable amount of money exists, and no one knows where it comes from."
This was the backdrop in late May 2014 as the WSOP opened in Las Vegas. Phua was due to arrive at Caesars Palace, with federal officials watching how he would play his hand.
THE NEW GUARD
As Phua and Yong were rising through the global poker hierarchy, they had no idea that a new hire in the Washington bureaucracy would ultimately come to impact them. In September 2012, Jennifer Shasky-Calvery took over as the director of the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department. A former federal prosecutor, Shasky-Calvery had specialized in money laundering and organized crime at the Department of Justice. She had been an All-America guard for George Washington's basketball team, winning Atlantic 10 tournament MVP as a junior and graduating in 1993 as her school's all-time leading scorer.
FinCEN's director attacked her new role with an athlete's determination. She exchanged the organization's roster of analysts for hires with backgrounds in law enforcement. She established a casino division and a money-laundering enforcement group.
While Las Vegas revenues had plummeted in recent years (Nevada casinos lost $6.8 billion in 2009), one game -- baccarat -- was in ascendance. In the wake of the global financial crisis of 2008, fewer Americans had money to gamble; fewer still played baccarat, which had never been a popular game in the U.S. Yet by 2013, baccarat accounted for 36.4 percent of table game revenues in Nevada.
"I thought, 'Where's the money coming from?'" says one former FinCEN official. "There was only one thing that could account for it: gamblers coming in on junkets from Macau. And I knew that the junkets were tied to organized crime."
It would take a major breach on the Strip for FinCEN to take greater notice and begin the yearslong process of cleaning house and reorienting its agency. Authorities claimed that in 2006 and 2007 a Shanghai-born pharmaceutical executive had laundered more than $45 million of Mexican drug cartel proceeds through Sheldon Adelson's Venetian casino.
This case alerted Washington to the desperation of an American industry dependent on Asian clientele. Treasury officials realized that Vegas casinos were accepting billions of dollars in wires, often without knowledge of their origins. Phua and Yong didn't know that Shasky-Calvery was steering FinCEN, ultimately, in their direction. A year into the job, Shasky-Calvery visited Las Vegas for the Global Gaming Expo, the world's largest gaming industry conference. She was there to deliver a stern message. "I fear there may be a culture within some pockets of the industry of reluctant compliance with the bare minimum, if not less," she said. "Being a good corporate citizen and complying with regulatory responsibilities ... saves your casino from a large fine, and it saves your casino's reputation."
As the 2014 WSOP opened in Vegas, views in Washington and Beijing were aligning. Chinese President Xi Jinping's Operation Foxhunt sought financial criminals who had fled to the West. The Macau junket business was in Xi's sights for its underworld ties. Phua was being squeezed from both sides.
BIGGEST GAMES IN TOWN
Last year's WSOP was proof of just how the event has grown, from a backroom smoker into a seven-week, 65-event tournament, one of the highest-profile retreats in a city built for them.
Why would Paul Phua step foot in Vegas at such a time, with an eye in the sky watching his movements? "Carelessness," says a Macau casino executive. "He got too bigheaded. Too much money to be made. Each World Cup, [IBC] makes about, according to rumor I hear, about $1-2 billion. He obviously got too careless. It was really negligence on his part." Even so, his bookmaking empire, with its global character, was nearly impossible for law enforcement to understand. On June 11, 2014, Phua and Yong arrived in Las Vegas a day before the only competition that meant more to them than the WSOP. The World Cup was the biggest event in sports gambling. One monitoring agency estimates that the 2014 World Cup generated more than $130 billion in betting, legal and illegal.
Caesars Palace had recently opened the villas, a series of 8,000-square-foot-plus residences reserved for gamblers who brought in at least $1 million in action. The properties were outfitted with movie theaters, hand-carved bathtubs of Italian stone, round-the-clock butlers and 40-yard lap pools. Celine Dion has stayed there, as has the crown prince of Saudi Arabia. The price is $40,000 per night, but Caesars typically waives the fee.
Associates of Phua and Yong were already there, nine across three villas. Each room number, in keeping with Asian superstition, began in 888. Phua stayed in Villa 8882, along with his 23-year-old son, Darren. In Villa 8881, Yong bunked in with his son and a girlfriend. Four additional guests -- all Chinese nationals -- were registered in Villa 8888.
After checking in, Phua's associates asked Caesars staff to bring several big-screen TVs to Villa 8888, along with desktop computers, monitors and laptops. They requested the installation of multiple DSL lines. They asked for access to several TV providers. Caesars staff, accustomed to the eccentricities of villa guests, took no special notice.
AN ARRESTING DEVELOPMENT
One week after arriving in Las Vegas, Phua was gone. On June 18, his Gulfstream landed in Macau. Phua took a car to the Wynn casino. There, Macau police took him into custody.
Phua would later tell the FBI that the Macau cops had "roughed me up." Police paraded Phua in front of news photographers, handcuffed, along with 21 other men and women from Hong Kong, Malaysia and the Chinese mainland. Phua, like the other detainees, wore a black hood. The group stood accused of running a wire room at the Wynn, taking wagers on the World Cup: reportedly $645 million in bets during its first week. A police spokesperson stated that this was the largest bookmaking bust in Macau history.
Darren Phua texted Petros Stathis, a Greek businessman and friend of Phua: "Hi Petros ... Can u call me asap? Urgent!" Stathis reassured the younger Phua: "There is no Interpol warrant in the system for him, at least not in Europe. ... Do not worry, we'll manage it." (Stathis says he is a friend of Phua, but denies any connection to Phua's on-line gambling business.)
According to court documents reported in the Las Vegas Review Journal, Darren Phua texted one of the Macau arresting officers who was a friend of the family: "... They now negotiate. I hope that they want only money." The Journal also reported FBI claims that more than $500,000 in alleged bribes were exchanged for his release. Darren Phua texted Tom Dwan, writing: "Everything seems negotiable." Darren Phua later texted an associate at a Singapore phone number about his father's standing in Macau: "Guess he will be ban from entering Macau for years."
Paul Phua was welcome in the U.S., however, returning to Las Vegas on June 23. He informed Caesars staff that he was extending his stay to July 14, the day after the World Cup ended.
Phua reacquainted himself with the poker scene, playing a $100,000 buy-in at the Bellagio. The real action took place in an area even many Vegas insiders don't know exists, a gambling room called Salon 7. According to court documents, Caesars Palace extended Phua $21.5 million in credit, authorizing him up to a total of $24 million. Yong had an even higher line, securing $24.26 million, with leeway up to $30 million.
Caesars staff had handed out numerous keys to the three villas, 19 alone for Villa 8888, as revealed in court documents. Among the visitors were some of the most powerful figures in the Macau junket business. In all, the group had more than $93 million in Caesars credit.
Phua and Yong appeared to be providing services they had fulfilled in Macau for years; in Salon 7, Phua and Yong transferred money to the casino accounts of their associates. "We believed it could be proceeds from money laundering or payments for service," testified FBI Special Agent Minh Pham.
Phua and Yong were accustomed to settling up in the junket rooms in Macau. But some customs don't translate.
THE WIRE ROOM
Caesars Palace invested substantially in the villas' interiors, each property receiving more than $10 million in furnishings. Hotel management conducted regular inspections of the villas while guests were absent.
Christian Brosius, the director of luxury hotel operations at Caesars, walked through Villa 8888 in mid-June. He noticed that several vases had been removed from a tabletop. In their place was a row of computer monitors and phone lines. Brosius photographed the layout.
On Friday afternoon, June 20, Paul Urban, the director of special investigations in the Caesars Entertainment law department, received a call from Gary Selesner, the president of Caesars Palace. Urban met Selesner in an office hallway. Selesner appeared agitated. He was waving a piece of paper in his hand, a printout of Brosius' photos.
In the Caesars Palace engineering department, Urban spoke with the technicians who had installed the custom equipment in the villas. "What's going on in Villa 8888?" he asked. One engineer replied without hesitation: "illegal sports betting."
Urban traced activity in Salon 7, plotting transfers of $3 million. Urban also uncovered transfers that had taken place at Caesars during the period between Dec. 26, 2013, and Jan. 3, 2014, during another Phua visit. "My concern was why they were transferring such a large amount of money to a person that I don't know anything about," Urban testified. "What's his relationship?"
Urban was aware of tightening federal regulations. "There's been a change in FinCEN's guidance, in direction and in their enforcement," he testified. "One of the biggest concerns that the IRS has expressed to us was the transference of wealth. Why would I be transferring $100,000 to this person if they're not a family member or close friend?"
This led Caesars to an unsettling conclusion. The casino, which had been losing money, was in no financial position to risk a relationship with its freest-betting clients. But if Urban failed to take his concerns to a higher authority, Caesars risked more than that.
On June 30, Creighton Felt, who oversees investigations for the Nevada Gaming Control Board, called Ricardo Lopez, a board investigator, into his office. Felt showed Lopez a piece of paper. It was an email from Urban, and it included one of Brosius' photographs from Villa 8888. Lopez blurted out: "That's a wire room." Felt didn't prevaricate: "No s---."
Felt kept abreast of events in Macau, and he knew that Phua had been arrested there in June. Felt also possessed an inventory of confiscated property from the Wynn Macau bust, which resembled the equipment requested by the Caesars villa guests. When he phoned FBI Special Agent Minh Pham, on June 30, Felt encountered another wrinkle. Pham said that the FBI was already investigating Phua.
On July 1, according to court filings, Pham emailed Eric Johnson, the chief of the criminal division in the U.S. attorney's office in Las Vegas. "I'm getting interesting information from Creighton Felt with the Nevada Gaming Control Board," Pham wrote. "It seems like Phua and his Triad buddies are operating an ... illegal sports book out of the villa and another room at the Caesars Casino."
After speaking with Johnson, Pham emailed several FBI colleagues. "[Johnson] said they will definitely work this case with two identified triad members, [Paul] Phua and [Richard] Yong. He said Phua's private jet is seizable [sic], we just need to tighten up the PC [probable cause]." Later that day, the FBI opened its case on the occupants of the Caesars villas.
There was just one problem: Phua and Yong were aboard the Gulfstream, leaving U.S. airspace.
NETWORK NOT AVAILABLE
They landed in London on July 2. There, according to a London source, they attempted to establish a wire room for unregulated betting, but their potential host declined. On July 3, they returned to Las Vegas.
The FBI was working to establish probable cause. For this, Pham needed intelligence. A cable technician suggested disrupting villa Internet service. If Pham cut the Internet during the upcoming World Cup quarterfinals, the occupants of Villa 8888 might invite him in for repairs.
As agents discussed the strategy, the butler working in Villa 8881 requested a laptop. Lopez and an engineer entered Villa 8881. The butler met them at the door. He was adamant: The men were to remain in the entryway. Lopez and the technician heard shouting coming from inside the villa, along with audio streams of a soccer game.
This wasn't enough, so Pham continued with his original plan. He contacted Assistant U.S. Attorney Kimberly Frayn, who cautioned him against this approach, which might infringe on civil liberties. Even so, on July 5, during a World Cup quarterfinal match between Argentina and Belgium, the FBI cut Internet service to Villa 8882.
Lopez and FBI agent Mike Kung, a Mandarin speaker, entered Villa 8882 dressed as technicians. Paul Phua sat at one end of a table, Darren Phua at the other. Lopez spied Darren's laptop over his shoulder, a sports betting website on the screen. Looking over Paul's shoulder, Kung also saw an online sportsbook.
"One of the comments around the instant messenger was something to the extent that the two had placed a bet," Kung testified, "and the person that Mr. Phua was instant messaging responded back to look on the hedge bet. ... I could see sport lines, like, for example, minus one and a half, minus two and a half."
Agent Pham failed to include the Internet ruse on the warrant application he submitted to Magistrate Judge Nancy J. Koppe, who subsequently authorized a warrant. This would be a costly error.
Twenty-three FBI agents mustered near the Caesars villas, Kevlar vests strapped, automatic rifles drawn. Pham, a 15-year bureau vet, was at the lead, with an expert in cybercrime and another agent fluent in Mandarin at his back.
Meanwhile, across the Las Vegas Freeway at the Rio Hotel and Casino, the WSOP main event was winding its way to the final table. And 6,000 miles away, in Sao Paulo, Argentina and the Netherlands were preparing to meet in a 2014 World Cup semifinal.
These unrelated events brought Pham and his squad to the Strip on July 9 at 2:50 p.m., crouched outside Villa 8882. The team stormed in to find several men watching the World Cup match in the villa's main room. The agents focused on Paul Phua, who despite the commotion continued to stare into a laptop at the portal for a sports gambling website. Darren Phua sat nearby.
"Put your f---ing hands up!" the agents yelled. "Don't f---ing move!" They handcuffed father and son, forcing them to their knees against a wall.
In nearby Villa 8881, agents detained Richard Yong and his son. When a woman stepped out of the shower, agents handcuffed her too. In Villa 8888, agents found a man at the center of a U-shaped table, seven computer screens in front of him, next to a woman who was furiously pecking on a keyboard. "Hands up!" agents shouted. She lifted one hand in the air but continued typing with the other.
According to Phua, the FBI left him handcuffed for five hours. He told agents that he had been monitoring World Cup betting odds. He said that he had been communicating via instant messenger with someone named "Foo," who was placing World Cup bets on his behalf in the Philippines. Phua said that he had invested 200 million in unspecified currency in IBCBet.
Darren Phua told the FBI that his father owned IBCBet. Darren himself appeared to have been taking bets on World Cup matches, via text message from Las Vegas-area cellphones. "Can I bet 13k on Argentina w you as well," read one text, according to court filings. Darren replied: "ok let me make a call." Another message read, "bettin 25k on over," to which Darren responded, "Goodluck to us!"
On Paul Phua's laptop, agents recovered hundreds of instant messages containing data specific to World Cup matches, odds and betting amounts. A July 8 message, from username "byronchia," began: "Hi Boss, This world cup until 5th July our 4 Main products." The message went on to list a host of categorized numbers, including win/loss percentages. The message concluded: "Grand Total including all other products 2,748,422,434." The FBI assumed that this final number was denominated in Hong Kong dollars, a converted total of roughly $357 million in illegal wagers.
When FBI agents questioned Phua about his activities in Macau, he said he owned a junket company named Ka Phook. In Villa 8881, Yong stated that he and Phua owned the Star 888 junket. Yong mentioned that he had backed two poker players, Igor Kurganov and Philipp Gruissem, in the recent Big One for One Drop tournament.
The FBI claimed to have discovered evidence that IBCBet was using Macau junket operators Neptune Group and Sun City Group to settle bets with clients. On one of the group's computers, the FBI found a digital photo of a passport belonging to infamous junket owner Cheung Chi-Tai (who currently faces money-laundering charges in Hong Kong). The file name of the passport image was "BOSS HKSAR," or Hong Kong Boss.
The FBI made no arrests on July 9. On July 13, after Germany beat Argentina in the World Cup final, Paul and Darren Phua were walking through the lobby of the Palazzo hotel, down the Strip from Caesars. Before the Phuas reached the valet stand, several FBI agents took them into custody.
The federal government wins 93 percent of its cases, but it was now facing one of the world's great oddsmakers. Phua had done plenty to increase his chances. A youthful 60 years old, David Chesnoff has floridly represented Mike Tyson, Britney Spears and Paris Hilton. He once persuaded a court of law to reduce a client's gambling debt from $14.75 million to $100,000. Chesnoff had also represented Phil Ivey in divorce proceedings. Phua, in addition, hired one of Tom Dwan's poker acquaintances, Washington attorney Tom Goldstein, who has argued 36 cases before the Supreme Court and teaches law at Harvard. It didn't take these minds long to identify the vulnerability in the government's case.
Six of Phua's seven co-defendants pleaded guilty to misdemeanor offenses and departed the U.S. (The government dropped charges against the seventh, Yong's son.) That left Phua, the government's primary target, to fight felony charges.
Phua waited out the many filings and motions of the U.S. attorneys and his defense counsel, forbidden by the court from entering a casino or using the Internet. Meanwhile, his contacts lobbied behind the scenes.
In December, Malaysia's minister of home affairs wrote the deputy director of the FBI, disputing Phua's alleged triad affiliation. "Mr. Phua has, on numerous occasions, assisted the Government of Malaysia on projects affecting our national security," he wrote, "and accordingly we continue to call upon him to assist us from time to time."
Figures with even greater influence similarly came to Phua's aid. Ron Noble, who worked in the Clinton administration, had overseen FinCEN as undersecretary for enforcement at the Treasury Department in the '90s before being elected secretary general of Interpol. After leaving Interpol last December, Noble established a consulting firm, RKN Global. Rutsel Martha, Interpol's former general counsel, began making phone calls on Phua's behalf, explaining that he and Noble were considering taking him on as a client.
While Phua was exploiting his relations with international police, his strongest ally turned out to be the FBI itself. Chesnoff and his colleagues filed a motion claiming that the FBI had obtained its search warrant unconstitutionally.
While the court deliberated, a Beijing crackdown on the junket sector discouraged VIP gamblers from coming to Macau. Revenue has fallen 40 percent so far this year, wiping out $75 billion in market value for Macau's six casino operators. "We're sailing in uncharted waters," Adelson said on a Sands earnings call. "And I hope we don't sink like that boat off in the Mediterranean."
The big poker table in Macau lost momentum and left its regular home at the StarWorld for the Venetian. MGM petitioned the Macau government to cancel Star 888's junket license. And IBCBet rebranded itself MaxBet. "You don't change your brand," says an associate of Phua's. "For Coke -- IBC -- to change your brand, this is serious." Meanwhile, in January, Caesars took the painful step, $18.4 billion in debt, of filing for bankruptcy.
In April, after nine months of observing events in Macau and Las Vegas, Phua received an indication of his fate. U.S. District Judge Andrew Gordon concurred with Chesnoff, ruling the FBI's villas search unconstitutional.
"Permitting the government to create the need for the occupant to invite a third party into his or her home," Gordon said, "would effectively allow the government to conduct warrantless searches of the vast majority of residences and hotel rooms in America." The government's case disintegrated. No matter the grand taxpayer waste in this botched investigation, the Department of Justice continued to pursue the case. FBI agents continued to question a broadening network of sources in Europe and the Far East about Phua.
On June 1 of this year, Gordon dismissed the case against Phua. He was now free to go. Yong had already shown how easy it was to pick up where they had left off. In January, Yong had been spotted at the Crown Melbourne Casino, where he entered the Aussie Millions $100,000 buy-in. Seven weeks after pleading guilty in Las Vegas, Yong won the tournament, collecting $1.4 million. Looking on, Phil Ivey voiced a prescient question: "Where's the party at?"
That was difficult to answer. It still is. Yong and Phua are running out of friendly ports.
Just hours after Gordon rendered his ruling, Phua was in a car heading for McCarran International Airport, a 10-minute ride from the Las Vegas Strip. Chesnoff and Goldstein saw him off at the executive terminal. The engines of Phua's Gulfstream V fired, and at 4 p.m. the plane lifted into the sky over the gleaming gambling towers. Eleven hours and 31 minutes later, Phua touched down in Montenegro, where his credit is still good.