SkyCity Casino is at the centre of a $120 million drug bust with key players in the alleged international crime syndicate spending millions of dollars in the VIP lounge.

More than 330kg of the class-B drug pseudoephedrine was seized in Operation Ghost, which police say is enough to produce $100 million worth of methamphetamine.

Homes, luxury cars and cash worth up to $20 million were also seized in the record-breaking haul.

Inquiries by the Weekend Herald can reveal that the 18-month investigation started in the VIP lounge of the casino and police are focusing their attention on the millions of dollars gambled there by several individuals.

More than $120 million in drugs and assets were seized this morning in an 18-month investigation involving 330 officers from police, OFCANZ and Customs.

Assistant Commissioner Malcolm Burgess confirmed SkyCity gambling records for "three or four" targets would form part of an ongoing investigation to seize their assets.

"Substantial sums of money" were involved but Mr Burgess would not comment on specific amounts.

"If someone has spent a large sum of money at the casino and they haven't got a legitimate reason for having it, given the activity they've been allegedly engaged in, it's a reasonable assumption to think the money is connected to drugs," said Mr Burgess, the head of the Organised and Financial Crime Agency of New Zealand.

"I'm aware of three or four [accused] with a history at the casino. That gives us some insight into their assets. We'll use that as part of our investigation into the asset seizure and restraint process."

He did not "rule in or rule out" money-laundering charges being laid against the accused.

A spokesman for SkyCity said the casino had co-operated fully with the police and the Department of Internal Affairs and "fully discharged" its legal responsibilities, which he could not elaborate on because of legal restrictions.

More than five million people visit SkyCity each year, of which a small number try to engage in criminal activity, the spokesman said.

"We take our responsibilities in this area very seriously. We place a very strong emphasis on surveillance and security, spending millions of dollars on this each year. We work very closely with the police and other enforcement agencies.

"We have zero tolerance for alleged criminal behaviour, that's why any customers caught up in this investigation have either already been banned from our premises or will be as soon as possible as more information becomes available."

This is not the first time SkyCity has been embroiled in a major drugs operation.

Two ringleaders, Tac Kin Voong and Ri Tong Zhou, spent nearly $20 million at the casino in 12 months while using the VIP lounges as an office to conduct their criminal affairs.

In sentencing Zhou to 15 years in prison, Justice Rhys Harrison noted that anti-gambling lobbyists had warned that the casino could become a "scene for large-scale criminal activity or a meeting place for people who commit serious crimes".

A 2007 report by the Department of Internal Affairs revealed "a significant amount of evidence" that predominantly Asian groups "were frequenting New Zealand casinos for the purposes of criminal networking, money laundering and social gambling using illegitimate funds".

Operation Ghost has not uncovered any evidence of drug deals taking place inside SkyCity - unlike Zhou and Voong - but senior members of the alleged criminal syndicate arrested this week were socialising in the exclusive VIP lounge.

Their combined gambling turnover, the total of money spent and winnings, is believed to be in the tens of millions of dollars each year.

Assets will be restrained under the Criminal Proceeds (Recovery) Act.

The law essentially forces someone to prove how an asset was paid for - even if they were acquitted on criminal charges.

Report cites link to laundering

The link between SkyCity and allegations of organised crime gives more ammunition to critics of the Government's deal with the casino for a $402 million convention centre.

The Herald revealed last year the casino would get more cashless gambling machines, among other concessions, in return for the convention centre investment.

The Ticket-In Ticket-Out machines make it easier to launder money, according to a Department of Internal Affairs report released under the Official Information Act.

Money-laundering in casinos can be done in several ways. One is simply exchanging cash for casino chips, then cashing them in later in the day for a winner's cheque, although doing this too often can raise suspicions among casino staff. Alternatively, money can be pumped straight into poker machines, which work on a mathematical calculation that the casino will eventually keep 12 per cent of the takings. That means that by spending enough time - and money - someone can recoup up to 88 per cent of the money gambled.

The Green Party opposes the convention centre deal and last year suggested the casino should pay back the millions of dollars in criminal profits spent there.

SkyCity chief executive Nigel Morrison said at the time that the Greens' claims had no substance, and no one was convicted of money-laundering at SkyCity.

Documents released under the Official Information Act show Justice Ministry officials believed the wording of the money-laundering offence did not meet New Zealand's international obligations.

Money-laundering is widely considered to include situations where criminals are prepared to deal with the profits or assets of criminal activity as apparently legitimate income. But court judgments have interpreted the charge to mean the Crown must not only prove that the alleged launderer converted assets from one form to another, but did so with the "very purpose" of "concealing" the property.

A consequence of that ruling is that underworld figures have been acquitted of money-laundering because they publicly spent millions of dollars in cash or assets derived from serious crime such as drug dealing.

Justice Minister Judith Collins has signed off on a change to the Crimes Act charge of money-laundering but it has yet to come into force. Official figures show that just 25 per cent of money-laundering prosecutions have been successful.