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CCTV Accuses Shanda Subsidiary of Online Gambling

Sohu IT, 3/23/11

In an episode aired yesterday entitled 'Dangerous Game,' China Central Television (CCTV) program Jiao Dian Fang Tan ("Topics in Focus") reported that Shanda Interactive (Nasdaq: SNDA) online gaming subsidiary Bianfeng Group was involved in online gambling activities. According to the CCTV report, a Shanghai-based player referred to as Wang, in seven separate rounds of Bianfeng's leisure game "Hong Kong Poker," lost a total of nearly RMB 767,000.

The CCTV report accused Bianfeng of running an online gambling operation with "Hong Kong Poker," noting that online gambling was banned in 2005 by China's General Administration of Press and Publication in its "Notice Pertaining to the Prohibition of Gambling Activities in Online Games."

Also in the report, CCTV questioned whether Bianfeng promotes the use of illegal virtual currency, both through its tacit approval of virtual currency in the game being exchanged for RMB, as well as its profiting from black market virtual currency exchanges.

Bianfeng has yet to comment on the report.

Wang told CCTV that although Shanda called for a halt to virtual currency trading, ads for virtual money changers were widespread, and transactions were made across Bianfeng's platform.

Wang said that players would deliberately lose in order to transfer virtual currency to the money changer, who would then transfer RMB funds via Alipay.

In-game virtual currency could be purchased at RMB 125 for 1 mln points, but conversely 1 mln points could only be exchanged for RMB 70. Transactions can range less than a few million or over 400-500 mln, and are easily visible to Bianfeng.

"While Bianfeng claims to be against online gambling, they turn a blind eye to the virtual currency black market," said Wang, who also claimed that Bianfeng takes a 1% cut from each transaction the virtual money changers make.

Keywords: online gaming Shanda scandal Internet online gambling virtual currency SNDA Bianfeng

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