"The [Hangzhou] network acted as a bridge between Chinese gamblers and overseas Internet casinos in the Philippines," Wu Jun, spokesman for the public security bureau of Xiaoshang district told the newspaper China Daily.
"About 80 percent of the gamblers are local businessmen, and chances are that the money they bet came from their companies' accounts," Wu claimed.
Briefing the press, Wu Jun said that the underground gambling network was set up by a wealthy forty-something local businessman surnamed Li in March 2008. Li was acting as an agent for an unidentified Philippines-based online gambling website and had been recruited to the role while he was gambling in Macau. Li had been required to place a 5 million yuan deposit to set up the action, and 17 percent of the amounts won from players would go to the website as a fee.
Hangzhou gamblers could view real-time images of the casino streamed from the Philippines via the website and place bets through the agent's account. Li's cut was 10 percent of the winnings as commission, while the person who introduced the gambler to the website received a 7 percent commission.
The China Daily reports that to maximise commissions, Li had to attract as many gamblers as he could to his virtual casino, which only consisted of a laptop with an Internet connection. He ran the gambling network under a pyramid scheme in which gamblers were encouraged to bring in more people to join the website's network in order to earn more commission.
"Li provided a convenient but illegal platform for wealthy businessmen, who wanted to gamble in Xiaoshan," Wu said. "Otherwise they had to travel all the way to Macau to do so."
Under current Chinese law, gambling is prohibited, with the exception of the Hiong Kong offshore island of Macau, the newspaper claims.
Following his arrest a contrite Li told the Hangzhou-based Qianjiang Evening News: "This is the stupidest thing I've ever done. The whole thing started as a joke, but the joke went too far. I was not short of money, I was just being greedy."
Li told the evening newspaper his normal annual income was around 3 million yuan.
Li's involvement in a profitable gambling enterprise was uncovered almost by accident by police investigating the case of a fugitive businessman who had absconded owing local banks "hundreds of millions of yuan". Investigators traced much of the money back to Li's online gambling network.
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