Wynn may use special bond offering to recover from $131M forfeiture

Wynn Resorts Ltd. has issued an $800 million private offering that industry experts say could protect the company from losses suffered when it agreed to forfeit $130.1 million in a settlement with federal government investigators.

The company on Tuesday announced issuing $800 million in senior notes at 6.25 percent due in 2033.

In a Security and Exchange Commission filing, Wynn said the company plans to use the net proceeds to pay off older Wynn Las Vegas debt and associated expenses as well as potentiallly pay for all or a portion of the $130 million forfeiture.

Representatives of the U.S. Department of Homeland Security Investigations, IRS Criminal Investigations, the Drug Enforcement Administration and the Las Vegas Financial Crimes Task Force worked together to uncover what amounted to a scheme to attract high-rolling foreign gamblers to play at Wynn properties.

In a note to investors, gaming analyst Colin Mansfield of Las Vegas-based CBRE Credit Research said the forfeiture and the refinancing should not drastically affect Wynn.

“Big picture, we’re not overly concerned with the announcement given it signals a resolution of the issue, is a manageable cash outflow and highlights Wynn’s cooperation (Wynn has made many corporate governance improvements over the years),” Mansfield said in a Tuesday note. “In addition, similar fines against other casino operators (albeit smaller) have not had long-term impacts on their businesses or credit profiles.”

Wynn contends it agreed to forfeit funds and was not fined.

Nasim Binesh, an assistant professor at the University of Florida’s Department of Tourism, Hospitality and Event Management, said Wynn should be able to put the matter behind it and resume its growth trajectory.

‘New pressures’

“The $130 million forfeiture and increased debt through the stock offering could introduce new pressures, but if Wynn continues optimizing costs and leveraging its growth initiatives effectively, it can sustain its upward trajectory,” Binesh said in an email. “Wynn Resorts is well-positioned to navigate this situation, if it plays its cards right.”

Binesh said Wynn has experienced significant financial turbulence over the past five years with large losses in 2020, 2021 and 2022 before rebounding to a profit of $730 million in 2023.

Wynn’s $800 million special bond offering will support growth initiatives.

“This capital injection will help the company manage its debt,” she said. “Issuing special (bonds) like this can have mixed effects on a company’s financial health. On the positive side, it allows Wynn Resorts to raise substantial capital without immediately depleting its cash reserves, which is crucial for financing large-scale projects and managing debt. However, increasing the company’s debt obligations could be a concern if revenue growth doesn’t keep pace, as it adds to the company’s overall financial liabilities.

Wynn is in the midst of a major capital project in the United Arab Emirates.

Wynn Al Marjan Island

The company has a 40 percent stake in the $3.9 billion Wynn Al Marjan Island on 115 acres in the Ras Al Khaimah emirate on the Arabian Gulf inlet of the Persian Gulf.

The 1,500-unit resort that will have rooms, suites and villas, Wynn’s first beachfront property, initially will be the first UAE property with a casino.

The company also has land holdings across Las Vegas Boulevard from its existing Wynn and Encore Las Vegas properties and has indicated that it would eventually develop the land.

Running afoul of the law

As in recent investigations involving MGM Grand and Resorts World Las Vegas, Wynn ran afoul of the law by not knowing or not reporting suspicious activity of their customers in order to protect against allowing organized crime figures from laundering large sums of money through casino cages.

The discovery of Wynn Resorts’ use of unlicensed money transmitting companies worldwide is how federal authorities shut down an illegal system that had been operating since 2014.

Federal authorities on Friday detailed the case hours after the company itself acknowledged the illegal operation in its SEC filing.

In return for signing a non-prosecution agreement admitting to wrongdoing, Wynn is forfeiting $131.1 million it had received from gamblers and businesses connected with the illegal system over the years.

“The criminal penalty paid by Wynn is the largest criminal penalty in the history of the Department of Justice for a casino,” said Daniel Silva, a white-collar crime investigator in the San Diego office of the Los Angeles-based Buchalter Law Firm who launched the investigation when he was with the U.S. Attorney’s Office in 2014.

Money transmitting businesses

“The criminal conduct involved third-party businesses, agents and related entities in the United States, Latin America and Asia,” Silva said in an emailed statement. “These third-parties acted as separate, unlicensed financial institutions — known as ‘money transmitting businesses.’ Through the use of these money transmitting businesses, gamblers at Wynn and Wynn itself were able to evade foreign and U.S. laws governing monetary transfer and reporting. These transfers were extremely sophisticated, allowing for international underground banking transfers that concealed the true ownership, nature and source of the funds, which is contrary to the transparency intended by America’s anti-money laundering legal regime — known as the Bank Secrecy Act.”

The U.S. Attorneys Office explained how the scheme worked.

Wynn Las Vegas regularly contracted with third-party independent agents acting as unlicensed money transmitting businesses to recruit foreign gamblers to the property. For the gamblers to repay debts to Wynn or have funds available to gamble there, the independent agents transferred the gamblers’ funds through companies, bank accounts and other third parties in Latin America, China and elsewhere, and ultimately into a Wynn-controlled bank account in the Southern District of California.

Funds deposited into the Wynn-controlled account were transferred into the Wynn cage account. Wynn employees, with the knowledge of their supervisors, and working with the independent agents, eventually credited the Wynn account of each individual patron. The convoluted transactions enabled foreign gamblers at Wynn to evade foreign and U.S. laws governing monetary transfer and reporting.

Investigators gave several examples of how the scheme worked.

In one example, Juan Carlos Palermo, while acting as an independent agent for Wynn, operated and controlled multiple unlicensed money transmitting businesses in the United States and abroad that conducted more than 200 transfers with bank accounts controlled by Wynn or associated entities. Those transactions, on behalf of more than 50 foreign casino patrons, exceeded $17.7 million.

Wynn Las Vegas also facilitated the unlicensed transfer of money through a contact it referred to as “Human Head” or “Human Hat,” known in Mandarin as “ren tou.” In that scheme, a person known as a “Human Head” purchased chips at Wynn and gambled there as a proxy for another person who, in some instances, because of federal Bank Secrecy Act or Anti-Money Laundering laws, was unable or unwilling to conduct financial transactions or gamble under his own identity. The true patron, however, would direct the Human Head’s gaming. Wynn knowingly allowed this form of gambling without scrutinizing the true patron’s funds and without reporting the suspicious activity.

‘Flying Money’

In another example, Wynn facilitated the unlicensed transfer of money to and from China through a method known as “qian chen” or “Flying Money.” A money processor, acting as an unlicensed money transmitting business, collected cash from third parties in the United States and delivered that cash to a Wynn patron who could not otherwise access cash in the U.S. The patron then electronically transferred the equivalent value of foreign currency from the patron’s foreign bank account to a foreign bank account designated by the money processor. The Wynn patron paid the money processor a percentage of the value transferred. Like Human Head gambling, Wynn knowingly allowed this form of gambling without scrutinizing the source of funds and without reporting the suspicious activity.

Wynn also facilitated the international transfer of money and conducted other financial transactions for resort patrons whose activity should have triggered the filing of suspicious activity reports. For example, in 2018, Wynn facilitated financial transactions worth approximately $1.4 million for an individual who two years earlier had been publicly linked to proxy gambling and a year earlier, while in the company of the president of marketing of a Wynn international affiliate, was denied entry to the United States because of suspected associations with a criminal organization.

In another instance, Wynn allowed and did not report transactions involving millions of dollars by an individual who, according to publicly available information, had spent six years in prison in China for conducting unauthorized international monetary transactions and violations of other financial laws.

Wynn officials acknowledged that all employees and executives who had been a part of the scheme were no longer with the company, including former Chairman and CEO Steve Wynn who resigned in 2018 over a sexual harassment scandal. Steve Wynn has never admitted to harassing anyone but he and the company he formerly led has paid millions of dollars in fines to gaming regulators in Nevada and Massachusetts where the company operates Encore Boston Harbor.

With the resolution of the illegal money transferring case, company officials said all legal matters relating to Steve Wynn’s company oversight have been resolved and the company now intends to focus on the future.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on X.