Shenzhen gold companies investigated for illegal gambling

Three gold and jewelry companies in the Shuibei area of Shenzhen, Guangdong province, have recently been placed under investigation for suspicion of operating casinos.

According to an industry alert issued by Shenzhen Gold & Jewelry Association, investigations have revealed that the companies, operating under the guise of gold trading, were actually conducting 'non-physical gold betting' businesses through online platforms, and their actions are suspected of constituting the crime of illicit gambling operations.

The individuals in charge of the companies, plus key company members, have been subject to coercive measures in accordance with the laws, and those involved will face severe legal consequences, the industry alert said.

"These cases have exposed how certain enterprises, in pursuit of illegal profits under the facade of physical gold trading, have induced clients to participate in high-leverage directional betting — essentially wagering on price rises or falls," it said.

"Their operations have completely deviated from the normal business scope of the gold and jewelry industry, severely disrupted market order, and tarnished the sector's reputation," it added.

Zhang Wenyang, secretary-general of Shenzhen Gold & Jewelry Association, said the association encourages merchants to hedge against price fluctuation risks through legitimate financial instruments, such as formal hedging, while also promoting industry self-discipline and optimized transaction models and exploring third-party oversight.

"But the association also reiterated that precious metal investments are market-based activities carrying inherent risks, and urged investors to make rational judgments and prudent decisions based on reliable information," Zhang added.

In mid-September, market rumors suggested that over 10 gold material suppliers in Shuibei area had encountered abnormal business conditions, with some having already vacated their premises without notice, drawing significant public attention, according to a report from online media outlet sznews.com.

The collapse of several gold suppliers was not due to physical gold bar sales, but rather to betting practices through forward pricing, the report said.

"This model allowed merchants to control large quantities of gold with minimal capital — clients only needed to pay a certain deposit to lock in bulk gold positions and capture all gains from bullish or bearish market movements," it said.