98 suspects arrested in Chinese city as part of nationwide mahjong gambling app scandal

CDC Gaming Reports

Police in Zhoushan, a city in eastern China’s Zhejiang province, have arrested 98 people suspected of taking part in a city-wide illegal gambling ring in which civilians gambled over 290 million yuan ($41.3 million USD).

According to Xinhua, Zhoushan mahjong parlors teamed up with developer Shanghai Technology Co., Ltd., to open what amounted to an online casino using the “Zhoushan Mahjong” app. The parlors would establish virtual gambling rooms within the app and would get a rebate based on how much gambling activity occurred in their room. The app had exceeded 220,000 registered and 20,000 total daily users at the time of the police crackdown.

The app has grown exponentially in popularity since launching in Zhoushan in 2016 with the promise of free “gold coins” to users. In 2017, it began selling these “gold coins” while simultaneously establishing a rebate mechanism, turning the app into an illegal casino. In addition, users were encouraged, through the app, to create gambling group chats on social media platforms, which allowed Zhoushan Mahjong to spread like wildfire within the local population.

The app was developed by Shanghai Technology Co., Ltd., a Shanghai-based app development company that targeted over 20 provinces and cities with over 30 gambling apps. The apps proliferated by using brick and mortar businesses, such as mahjong parlors, as local proxies and social media group chats to further the apps’ reach.

A Chinese police task force established to take the team down raided Shanghai Technology Co., Ltd offices during a meeting in June, in effect wiping out the “online criminal gang.”

It appears the company targeted smaller cities due to their less sophisticated police forces; despite being based in Shanghai, the company never operated any gambling apps within the city. By Chinese standards, Zhoushan is a comparatively small city, with a population of just over one million. Other apps operated in cities like Cangzhou, in eastern Hebei province, with a metro population of 1.2 million, and Jinzhong, in east central Shanxi province, with an metro population of just 635,000.

The 98 suspects seized and 290 million yuan gambled are only connected to the “Zhoushan Mahjong” app. Total numbers in this nationwide scandal are currently unknown, but, given the fact that over 20 other municipalities had similar apps with varying levels of success, both numbers are likely to be staggering.