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SYDNEY (AP) — Australian gambling company Crown Resorts is unfit to run its new Sydney casino because it facilitated money laundering and had other problems, a regulator said Tuesday.

SYDNEY (Reuters) – Two Crown Resorts Ltd directors with links to major shareholder James Packer resigned on Wednesday, the first heads to roll after the Australian casino operator was deemed.

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Commissioner Patricia Bergin recommended several changes that Crown would have to make before it could run the casino in its 2.2 billion Australian dollar ($1.7 billion) Sydney tower.

The Crown Sydney Hotel Resort’s restaurants, bars and guest rooms opened in the harborside Barangaroo precinct in December without its centerpiece casino while Bergin completed her inquiry into Crown’s fitness to hold its gambling license.

Bergin has left the New South Wales state Independent Liquor and Gaming Authority, the gambling regulator, to decide the precise changes that Crown would need to make before the casino could open.

Crown said in a statement it would work with the regulator on Bergin’s findings and recommendations.

Crown, which owns Australian casinos in Melbourne and Perth, was granted a 99-year license to operate the Sydney high-roller casino in 2014. But news media reported in 2019 allegations including that Crown engaged in money laundering, breached gambling laws and partnered with junket operators linked to organized crime.

Crown denied the allegations and dismissed the reporting as unbalanced and sensationalized.

Bergin, a retired judge, began her inquiry into the media allegations in January last year.

Her recommendations include a forensic probe to make sure all money laundering in Crown accounts has been uncovered.

She also recommended a restructuring of Crown’s board of directors.

Crown entered into a trading halt on the Australian stock market earlier on Tuesday ahead of Bergin’s report being made public.

SYDNEY (Reuters) – Two Crown Resorts Ltd directors with links to major shareholder James Packer resigned on Wednesday, the first heads to roll after the Australian casino operator was deemed unfit to hold a gambling licence for its new Sydney casino.

The upheaval in the wake of a report commissioned by the state gambling watchdog raised speculation among analysts that the A$6.6 billion ($5.1 billion) company was in play as a takeover target.

The report, published on Tuesday, cited Crown’s links to organised crime and the “dysfunctional” influence of Packer as it declared the company unsuitable to hold a gaming licence for the casino in its newly opened A$2.2 billion Sydney waterfront resort tower.

The former judge who headed the inquiry, Patricia Bergin, recommended a 10% shareholding limit for all casino operators in New South Wales state, a condition that would require founder Packer to sell down his 36% stake.

Packer’s private company CPH said the departures of the executives, and the shift by a third director to independent status, would give Crown “clear air to work with (gaming regulator) ILGA in the execution of its announced reform agenda, and become a model casino operator”.

The CPH statement did not address Packer’s shareholding or plans.

Crown’s shares sank nearly 9% in early trading, compared with a slightly higher broader market, but clawed back some losses as speculation grew about the company’s takeover target prospects. The shares were down around 3.5% in early afternoon trading.

“The transaction creates an opportunity for trade buyers or private equity to secure a meaningful stake from a forced seller,” Citi analysts said in a note. They added that increased regulatory scrutiny would mean “constrained revenue and elevated costs” for the company.

Crown has said it planned to work with the NSW Independent Liquor & Gaming Authority (ILGA) after the report indicated that a sweeping overhaul of its board and business could see its licence reinstated.

The company has not commented on the future of any other directors, including Chief Executive Ken Barton, who was heavily criticised in the report.

Crown was granted a gambling licence for the Sydney tower several years ago, but the ILGA suspended it last year pending the results of the year-long inquiry.

As well as rife money laundering, the inquiry heard about a management structure where Packer requested frequent trading updates despite holding no board or management position, while attempting to take the company private – without disclosing the arrangement to other shareholders.

LENGTHY REFORM PROCESS

ILGA chair Philip Crawford said he planned to correspond directly with Crown chair Helen Coonan on a reform process he expected to take months.

“For any regulator and any government, they’re pretty scary terms,” Crawford told reporters about the report’s finding the company had been infiltrated by organised crime. “They’ve got a lot of work to do to satisfy us.”

Crawford cited a newspaper headline which said Crown needed to “blow itself up to save itself” and added: “that’s probably pretty close to the mark.”

($1 = 1.2928 Australian dollars)

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(Reporting by Byron Kaye in Sydney and Nikhil Kurian Nainan and Shriya Ramakrishnan in Bengaluru; editing by Jane Wardell)