An inquiry into whether Star Entertainment Group is suitable to regain its licence for the major casino has heard visitors claimed the million-dollar windfall through its malfunctioning "ticket in, cash out" system.
A glitch caused the machines to erroneously return guests' cash-exchange tickets if they inserted two simultaneously, allowing them to claim tickets more than once.
The error was not rectified for six weeks.
On Friday, The Star Sydney interim chief operating officer Peter Humphries admitted that the fraud could have been discovered sooner if the casino had followed its manuals and procedures.
"The majority of that issue happened in a two-week period," he said.
"It is my belief that there was multiple red flags that ... could have been picked up prior to that period."
If the unauthorised withdrawals had been classified as a "variance", they would have been included in incident reports and the issues would have been highlighted much earlier, Mr Humphries said.
The inquiry, led by Adam Bell SC, is the second into Star's suitability for the lucrative Sydney casino licence.
It was suspended after the first probe, which included revelations of illegal gang-linked junkets in gaming rooms and Chinese debit card transactions disguised as hotel expenses.
Government-appointed manager Nick Weeks was put in place to allow the casino to continue operating despite the suspension.
Concerns have been raised that any reforms at The Star might have been prompted by the manager's oversight, rather than cultural change at the casino operator.
Questions over Mr Humphries' suitability to run the Sydney casino were also aired on Friday, when he told the inquiry he was aware patrons were previously able to disguise gaming funds as hotel expenses.
He said he knew about the transactions but was not aware of the rules prohibiting China Union Pay funds from going to gambling.
Counsel assisting the inquiry, Caspar Conde, suggested it was inappropriate in such circumstances that Mr Humphries be put in charge of The Star in Sydney.
Mr Humphries replied: "No, I wouldn't agree with that."
Jessica Mellor, the chief executive of Star's Gold Coast casino, on Thursday became the latest senior staff member to depart the troubled company.
Ms Mellor, the casino's youngest and first female chief executive, tendered her resignation ahead of her final day with the company in late May.
Multiple former Star executives have told the inquiry that disillusionment with senior leadership led them to resign.
The company's share price has been in freefall since the start of the second inquiry's public hearings, plunging about 18 per cent during the week.
Shares are trading at less than a tenth of their value at their peak in 2016.
The inquiry is due to continue on Monday.
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