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A Taiwanese court has convicted 12 Japanese and Taiwanese employees of B2B online games supplier Ganapati for gambling offences, as well as company founder Hayato Kinoshita, although all have avoided jail time.
With most defendants pleading guilty, the Shilin District Court in Taipei on March 2 found that 12 of Kinoshita’s employees conspired to develop online gambling products and distribute them to numerous websites, receiving a 6 to 10 percent revenue share.
Four Taiwanese employees were convicted and given jail terms of four to five months, all convertible to fines.
Another eight employees, including Japanese national and manager Tomomi Matsumara, were given jail sentences of three to five months, also convertible to fines, but suspended for two years.
The court ruling only worsens Taiwan’s hazardous environment for online gambling service providers, who until a few years ago were thriving as Philippine operators looked overseas for more reliable and secure high-tech infrastructure.
David Lee, a lawyer and gaming law specialist with Taipei-based firm Lin & Partners, said the court ruled the employees were aware that their gaming software was to be used by players in China, which technically remains under the jurisdiction of Taiwan’s Constitution.
He said the revenue-sharing arrangement with website operators, staff awareness that software targeted real-money gambling and employee ability to access and monitor website operations, including player data and payouts, all contributed to breaches of the law.
Lee added that the majority of guilty pleas and lack of prison time would weigh against an appeal of the decision, potentially depriving the industry of a “fully litigated” case and a chance to stake out its territory in Taiwan’s vaguely legislated environment for B2B operators.
However, extra pressure was likely placed on the defendants after Kinoshita and prosecutors struck a plea bargain following his failure to overturn an exit ban.
Court documents seen by VIXIO GamblingCompliance show that on July 27 the High Court rejected Kinoshita’s appeal to lift the ban.
Six days later, on August 2, the Shilin District Court issued a summary judgment in lieu of trial, with Kinoshita pleading guilty and paying a NT$150,000 ($5,300) fine converted from a six-month prison term, suspended for three years.
That judgment allowed Kinoshita to leave the country, but it also made his employees’ legal defence much more difficult, Lee said.
Lee added that although the district court’s ruling is not binding on other litigation, “we cannot deny it will have a certain de facto effect on other gambling cases”.
The ruling also noted that another Japanese suspect in the case, former Ganapati Malta CEO Taku Sawada, is still on Taiwan’s wanted list in relation to the case.
The case was cracked in July 2020 when Taipei police raided software production company Gamatron Studios, a Taiwanese company linked to formerly London-listed Ganapati and its subsidiary Ganapati Taiwan Co, and detained 31 suspects including Kinoshita.
Kinoshita is identified in court documents as the beneficial responsible person for the three companies, which targeted customers in China, Thailand, Vietnam, several European nations and elsewhere.
A Taiwanese accountant for Ganapati who testified in the case also said that all of the company’s operations fell under a Japanese parent company Ganapati PLC and that certain profits were directed to another company, Ganapati Curacao.
The raid followed the British-based Ganapati arm’s delisting from London’s AQSE Growth Market and a Japanese regulator’s complaint against its Japan subsidiary GPJ Venture Capital for alleged illegal securities trading.
From January 2019 up until July 2020, gaming websites linked to the Taiwanese operation generated around NT$1.5bn ($53m) in betting volume, the documents show.
