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Gift Certificates: Gambling Chips?

Posted August. 21, 2006 03:06,   

한국어

On the afternoon of August 20 in front of a gift certificate exchange booth in a backstreet of Jung-gu, Seoul, a 30-something man who played in the nearby gambling adult videogame room “Sea Story,” waved 30 yellow gift certificates each worth 5,000 won, earned at the game-room, at the exchanger. The man said, “Ten percent goes to exchange fees, so it is 135,000 won in cash.” After counting the gift certificates, he hands the man 135,000 won. The dealer took 500 won per gift certificate as a fee. The 30-something man who received the money hurried to another nearby gambling arcade and immersed himself in more gaming.

Gift certificates that should be used in cultural establishments such as theaters, bookstores, or traveling agencies are in fact being used as gambling chips in casinos.

Illegal Exchange of Gift Certificates—

The dealers that exchange gift certificates earned as prizes in gambling arcades have two sources of revenue. Their main source of revenue is the exchange fee. When customers want to cash their gift certificates, they pay between 4,000 to 4,500 won for gift certificates worth 5,000 won on paper. They charge 10 to 20 percent of the gift certificates value as exchange fees.

The dealers then returns the gift certificates bought from the game room customers to the companies that issued them, and receive the same amount of gift certificates back from the company, which they sell to the game rooms. During this course, the dealer pays about 50 to 60 won per gift certificate to the companies issuing them as printing fees.

Most gift certificate dealers are also in the gift certificate distribution business. They buy gift certificates worth 5,000 won at 4,700 to 4,800 won, and sell them to gambling arcades. The gambling arcades then fill their gambling machines including “Sea Story” with such gift certificates as prizes.

When the cycle continues, the gift certificate dealers earn at least 200 won to a maximum of 800 won per gift certificate

Arcades Reuse and Even Forge Gift Certificates—

In order to avoid paying the fees to gift certificate issuers, often the exchanged gift certificates are not returned to the issuing companies but rather sold to the arcades and just filled back into game machines.

A dealer mentioned, “If the owner of the game room also runs an exchange booth, often the gift certificates will not be returned to the issuers to be disposed, but will be refilled into the gaming machines.” They want to save the 50 to 60 won fee paid per gift certificates which goes to the issuing company.

According to the “Regulation on Dealing with Prizes” set by the Ministry of Tourism and Culture, game room owners cannot cash or re-purchase prizes.

The number of counterfeit gift certificates has also greatly increased. According to police, last year only 413 counterfeit 5,000-won gift certificates were found, but this year, until late June, an amazing 49,138 forged gift certificates were discovered. Police consider that arcade owners seeking to cut costs in buying gift certificates used as prizes might be involved in the forgeries. As a matter of fact, since most of the gift certificates are cashed rather than used to purchase products, it is very likely that owners thought that even if forged the chances of being caught were very low.

As if having predicted that the market for prize gift certificates would become a gold-egg laying goose, there are allegations that money lobbying interfered in the processes of assigning gift certificate issuing companies.

A gift certificate company official disclosed, “At the time of the assignment, a broker told me that if I paid 200 million won, my company would be named as official issuing company.” A game room owner also said, “I once heard that the president of a gift certificate company saying that he paid 500 million won to the review committee in the process of deciding the official provider.”