Attorney Shao Shiwei | The “Gambling King” “Xi Mi Hua” Has Been Sentenced. Do the Tens of Thousands of Agents Under Him Constitute Criminal Offenses?

 

Introduction:

On December 4, 2023, the online voting for the “Top Ten Cases of 2023 in Advancing the Rule of Law in the New Era,” jointly organized by the Supreme People’s Court and China Media Group, was officially launched. One of the highly anticipated cases is the “Zhou Zhuohua Cross-Border Gambling Criminal Syndicate Case.”

According to case details disclosed by the Wenzhou Intermediate People’s Court, since 2007, Zhou Zhuohua, a shareholder and director of Sun City Gaming Promotion Co., Ltd. (a single-member limited liability company), contracted gambling halls in casinos in Macau and other locations, and operated multiple online gambling platforms for gambling activities. In order to obtain huge profits, Zhou Zhuohua used commissions and dividends as inducements to entice others to serve as agents, and through these

agents, organized and solicited Chinese citizens within the mainland to go to Sun City gambling halls to participate in gambling or engage in cross-border online gambling.

In August 2022, key members of the defendant group, including Zhang Ningning, were sentenced by the Wenzhou courts to prison terms ranging from one to seven years. In October 2023, the Macau Intermediate Court sentenced Zhou Zhuohua to 18 years’ imprisonment.

 

Does this cross-border online gambling case end here? No. This is merely the beginning.

 

Author of this article: Attorney Shao Shiwei

 

01

Agents are one of the most critical roles in cross-border online gambling platforms

The operation of a gambling website requires technical development and system maintenance personnel to complete the website’s development and operational tasks; it also requires platforms and personnel that provide fund payment and settlement, money laundering, and currency exchange services for gambling funds, to complete the payment and settlement of gambling funds; butThe most critical link remains the promotion and agency operations of gambling websites., the number of gamblers

volume, which directly determines the casino's revenue.

 

The gambling websites are located overseas. How do they attract more domestic gamblers? How are the gambling funds of domestic gamblers managed and settled? This requires a tightly organized agency hierarchy with clear division of labor.

 

The common organizational structure of online gambling platforms is as follows:

Organizer → Shareholder-level agents (agent accounts) → Gambling agents (agent accounts) → Gamblers (member accounts)

 

Gamblers only have member accounts, which can only be used for placing bets and cannot create subordinate accounts.

Agent accounts can create subordinate accounts to recruit downstream participants for gambling, and extract commission rebates based on the betting amounts of these downstream participants. Shareholder-level agents generally agree with the organizers to be responsible for gambling promotion in specific regions, recruiting subordinate gambling agents, and handling the payment and settlement of gambling funds. Shareholder-level agents participate in the gambling

website's profit sharing according to the proportion agreed upon with the organizers.

In terms of settlement methods, subordinate gambling agents deliver the gambling funds they receive to the superior shareholder-level agents. The gambling website settles with the shareholder-level agents, who then settle with the subordinate gambling agents.

According to reports, as of November 2021, the cross-border gambling criminal group led by Zhou Zhuohua committed the crime of operating a casino and developed a total ofmore than 400 shareholder-level agents(including 283 Chinese nationals),and more than 60,000 gambling agents(including 38,307 Chinese nationals), and recruited more than 60,000 members as gamblers within the territory of China.

 

 

02

Will agents be arrested? What sentence may be imposed?

According to the aforementioned information publicly disclosed by the courts, the number of Chinese-national shareholder-agents and gambling agents has been specified to the single-digit level. This indicates that the judicial authorities have alreadyobtained complete personal information on all 38,590 Chinese-national agents involved in the Zhou Zhuohua cross-border gambling criminal syndicate case.。

Do these agents constitute criminal offenses? The answer is unequivocally yes. However, from the perspective of conviction and sentencing, there remain many issues that need to be clarified regarding the criminal liability of online gambling agents.

 

From the defense counsel’s perspective, what are the key points for criminal defense by lawyers with respect to online gambling agents?

 

1. Will agents be deemed principal offenders?

Agents will be convicted of the crime of operating a casino, as there are clear legal provisions to this effect, leaving no room for dispute. The question, however, is whether all agents are principal offenders. Not necessarily. The characterization of agents as principal or accessory offenders is also a focal point of controversy in judicial practice.

 

Attorney Shao believes that, in accordance with the principle of proportionality among crime, responsibility, and punishment, it is necessary to distinguish and determine whether an agent is a principal or accessory offender based on factors such as the agent’s rank, the specific work performed, and the magnitude of benefits received.

 

First,，shareholder-level agents, who participate with the organizers in the distribution of the website’s profits. Although they are not “internal personnel” of the gambling website and generally do not sign labor contracts, shareholder-level agents, as collaborators in the operation of the gambling website, have deep interest ties with the website’s organizers, and upwardly toward the website operators and related core

Members are responsible for developing and managing subordinate agents downstream, assisting gambling websites in settling gambling funds and sharing in the profits. As such conduct is of a business nature, there is little controversy in classifying shareholder-level agents as principal offenders. However, even when classified as principal offenders, they should only be held liable for the amounts under their own names and those of the subordinate agents described below, rather than jointly with the operators of the gambling website

for all online gambling funds on the website.

 

Secondly, regardingsubordinate gambling agents，First, if they are ordinary agents at the lowest level (i.e., their downstream consists only of gambler member accounts, with no agent accounts), since their profit is derived solely from commissions on gamblers' betting amounts, and the gambling funds are handed over by them to superior agents, who in turn pass them up level by level to shareholder agents, who ultimately settle with the website

operators, ordinary gambling agents have no decision-making power over the profit-sharing method, the collection of gambling funds, etc., nor do they have the right to participate in the management of the website. Therefore, it is evident that, compared to the organizers and shareholder-level agents, ordinary agents occupy a clearly secondary and auxiliary position within the criminal group, and their proceeds are far less than those of shareholder-level

agents, making it more appropriate to classify them as accessory offenders.Second,if they are subordinate agents situated between shareholder-level agents and ordinary agents at the lowest level, should they be classified as principal offenders or accessory offenders? According to the 2010 "Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling" (hereinafter referred to as the 2010 Opinions), recruiting subordinate agents for gambling websites, where such subordinate agents accept bets, constitutes a serious circumstance of the crime of opening a casino, and such actors are generally classified as principal offenders. For example, in the case [Case No. (2021) Liao 0105 Xing Chu 708], Zhu used his agent account to open a subordinate account for Chi, with Chi responsible for soliciting gamblers and collecting rebates based on the amount of gambling funds. The court found that Zhu and Chi

Where a tiered agent allows a subordinate agent to accept bets, this constitutes a serious circumstance of the crime of opening a casino, and the individual is generally deemed a principal offender. For example, in Case No. (2021) Liao 0105 Xing Chu 708, Zhu used his agent account to create a subordinate account for Chi, who was responsible for soliciting gamblers and receiving rebates based on the amount of gambling funds; the court held that Zhu and Chi

Each is a principal offender.

 

2. Recruiting members and collecting commissions = acting as an agent?

In the preceding issue, our discussion proceeded on the premise that the term “agent” as used by us is consistent with the concept of “agent” under the criminal offense of operating a casino in the Criminal Law. In practice, however, a more common and more controversial type of “agent” operates as follows: by publishing promotional personal exclusive links through WeChat groups, online forums, or other information channels, and recruiting

downline members to participate in gambling, with the online gambling platform paying such person agency commissions and platform rebates based on the betting amounts or win/loss amounts of the downline users they have recruited.

 

Such “agents” are not “agents” within the meaning of the criminal offense of operating a casino under the Criminal Law, butin judicial practice it is common for individuals to be convicted on the ground of “serving as an agent and accepting bets.”。

 

What constitutes an “agent” in the sense of criminal law?We need to examine the relevant legal provisions:

According to the 2010 Opinions, the following circumstances constitute the act of operating a casino: “serving as an agent for a gambling website and accepting bets” (“agency-type” operation of a casino).

Furthermore, according to the Understanding and Application of the 2010 Opinions, merely serving as an agent without accepting bets does not constitute the act of “operating a casino” as prescribed by the Criminal Law.

 

In the aforementioned mode of conduct, the “commissions” or “rebates” obtained by the actor are not derived from opening accounts for gamblers within the actor’s own agency account and receiving rebates based on the gamblers’ betting amounts. In other words, the actor did not “accept bets.”

Gamblers require a link or an invitation code to access the website, which serves as a threshold. The actor merely provides gamblers with a channel to access the website. As forThe amount wagered by gamblers and the outcome of their bets are unrelated to the actor, who also lacks the authority to set odds, betting limits, or commission rates.The actor does not possess a genuine “agent account.”

In certain circumstances, the actor may merely be acting as a gambler, participating in the platform for personal gambling purposes. The actor shared the link with others only because friends wished to access the website. Any rebates are determined by the platform’s established mechanism: when others place bets, the platform automatically distributes the corresponding rebates to the actor’s account.

This arrangement is not determined by the actor.

 

In judicial practice, it is quite common for actors who share links to gambling websites and receive platform rebates to be characterized as serving as agents and accepting bets. Several cases are cited here for illustration, including (2022) Hu 0109 Xing Chu No. 660, (2023) Lu 1522 Xing Chu No. 273, and (2023) Gan 0825 Xing Chu No. 154.

 

However, Attorney Shao believes that, under such circumstances, it is more appropriate to characterize the actor as a joint offender in online gambling offenses, pursuant to the following provisions.If characterized as a joint offender, the sentencing would be significantly lighter than that for “operating a casino as an agent,” from the perspective of conviction and sentencing.。

 

2010 Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling

II. Determination and Punishment of Joint Offenses in Online Casino Operations

Whoever, knowing that a website is used for gambling, provides the following services or assistance shall be deemed a joint offender in the crime of operating a casino and shall be punished in accordance with Article 303, Paragraph 2 of the Criminal Law:

(1) Placing advertisements for gambling websites...Developingservices such as membership, where the service fees collected amount to RMB 20,000 or more;

 

 

2020 Opinions on Several Issues Concerning the Handling of Cross-Border Gambling Criminal Cases

III. Determination of Joint Crimes in Cross-Border Gambling

2. Acting as an agent for gambling websites or applications and recruiting players, members, or downlines.

 

In addition, apart from being characterized as the crime of operating a casino in the “agency” form, the model of recruiting members and collecting commissions may also becharacterized in judicial practice as the crime of operating a casino in the “profit-sharing” form.For analysis related to the crime of operating a casino in the “profit-sharing” form, please refer to “Referring Customers to Online Gambling Platforms for Commission: Why Do Court Judgments Vary Significantly?》。

 

 

Concluding Remarks

As stated at the beginning of this article, for the judicial authorities, this cross-border online gambling case has only just begun, with tens of thousands of agents still involved. Depending on their hierarchy, position within the criminal syndicate, illicit gains, and other factors, if an agent is determined to be a principal offender, given that online gambling funds typically involve substantial transaction volumes, there is a very high likelihood that the agent will be sentenced to imprisonment of five years or more.

The likelihood of a prison sentence remains very high.

In light of the specific circumstances of each case, distinguishing between the roles of agents as principal or accessory offenders, and differentiating whether the actor engaged in “operating a casino in the agency form” or merely committed joint crimes by recruiting members, may significantly affect the outcome of the case.