Macau casino magnate Stanley Ho has dropped a lawsuit against family members in the latest twist of a dynastic tussle over the ailing octogenarian tycoon's multi-billion dollar empire.

But in a video recorded on Sunday, Ho said the suspension of legal proceedings was intended to give his family a chance to broker a settlement that would return all the assets that he considered stolen, in order to resolve the standoff.

I give everyone a chance, said Ho, chairman of Macau's biggest casino operator, SJM Holdings, in the video.

We call it a misunderstanding so we can start afresh.

For decades, Ho oversaw the biggest gambling operation in Macau, a former sleepy Portuguese colony down the Chinese coast from Hong Kong.

Now, members of the 89-year-old's extended family -- he has had four wives and 17 children -- are scrambling for a share of his fortune.

The bitter feuding broke into the public realm early last week, triggered by a controversial asset transfer that whittled down most of Ho's assets to nothing.

Ho's lawyer did not rule out the possibility of a continuation of legal action should arbitration talks break down, and the family not surrender those assets back to Ho.

The matter will continue until we reach a satisfactory resolution, the lawyer, Gordon Oldham, told reporters.

As family members tussle over Ho's wealth, questions have been raised about his mental state but in a series of three videotaped conversations chiefly between Ho and Oldham, recorded over the past week or so, the tycoon appeared alert and coherent, consistently maintaining he wanted his assets back.

He also accused his daughter, Pansy Ho, considered one of Asia's leading businesswomen who now runs a major casino in Macau with U.S.-based MGM Mirage, of playing a key role in the share restructuring that effectively diluted Ho's stake in holding company Lanceford to zero.

This is something Pansy cannot afford, said Ho.

NOT RIGHT

Visibly fatigued and wrapped in a thick blanket and winter cap, Ho was pushed into hospital in a wheelchair, holding up his hand to shield his eyes from a blitz of camera flashes.

Ho's lawyer said the hospital visit was a routine one to adjust a tube in Ho's throat that helps his breathing.

Oldham suggested, however, the tycoon was experiencing deeper strains whilst appealing for his family to settle this matter and that they do not put this frail 89-year-old individual through this every day. It's just not right.

Just days after Ho filed to sue part of his family -- including five children and two of his wives -- over the disputed asset transfer, a legal document signed by Ho and made public on Monday showed that he was dropping the charges.

The back and forth between Ho and his three surviving wives and 16 surviving children, is fuelling uncertainty over the future of Ho's fortune.

All four major branches of his family have made claims on his fortune, though Ho himself made clear in his videotaped comments that he wants to split his fortune equitably.

Under the latest asset transfer which Ho wants reversed, children of the second family, including Pansy Ho, and the third wife would get the largest share of Ho's interest in SJM.

His first and fourth families, however, have not benefited from the transfer.

I want a fair division among my family, said Ho. I still maintain equality.

A court document, which was signed by Ho and forwarded to Reuters on Monday by a public relations firm representing his second and third families -- showed the legal action against 11 defendants including his third wife and five children of his second wife including Pansy Ho -- was discontinued on January 29.

Dr. Stanley Ho has informed the defendants that he does not see any point in continuing the legal action in the High Court, public relations firm Brunswick said in a statement to Reuters.

Ho has said he regretted that the dynastic feud had brought disturbance and worry to his beloved wives and children.

Shares in SJM were down about 3 percent on Monday, in line with declines by U.S.-based rival operators Wynn Macau Ltd, a unit of Wynn resorts Ltd, and Sands China Ltd, a unit of Las Vegas Sands Corp.

SJM has tumbled about 9 percent since the saga unfolded a week ago, wiping nearly $1 billion off its market capitalization. (Additional reporting by Tyrone Siu; Writing by James Pomfret; Editing by Chris Lewis and Robert Birsel)