An indictment has been unsealed charging the former CEO of 500.com (now BIT Mining Ltd.), Zhengming Pan, a Chinese national, with violations of the Foreign Corrupt Practices Act (FCPA).
BIT Mining Ltd. has agreed to resolve investigations by the Justice Department and the Securities and Exchange Commission (SEC) into related FCPA violations arising from the company’s participation in a corrupt scheme to pay bribes to Japanese government officials.
BIT Mining entered into a three-year deferred prosecution agreement (DPA) in connection with a criminal information filed in the District of New Jersey charging BIT Mining with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the books and records provisions of the FCPA.
A federal grand jury in the District of New Jersey returned an indictment against Pan on June 18.
Pan is charged with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA, one count of violating the anti-bribery provisions of the FCPA, and two counts of violating the books and records provisions of the FCPA.
BIT Mining, under the alleged direction of then-CEO Zhengming Pan, agreed to pay nearly $2 million in bribes to Japanese government officials to win a contract to open a lucrative resort and casino in Japan, said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division.
Pan was indicted for his alleged role in directing company consultants to pay the bribes and to conceal the illicit payments through sham consulting contracts.
“Paying bribes to foreign government officials is a serious crime. The top leadership of BIT Mining, then known as 500.com, directed consultants to pay bribes to Japanese government officials to win a bid to open a large resort in Japan,” said U.S. Attorney Philip R. Sellinger for the District of New Jersey.
The illegal scheme started at the top, with the company’s CEO allegedly fully involved in directing the illicit payments and the subsequent efforts to conceal them, said Sellinger.
“The company has admitted its crimes and agreed to pay a $10 million penalty, and its then-CEO has been charged for his role in the scheme,” added Sellinger. “This agreement and indictment hold both the corporation as an entity and its top leadership accountable.”
According to court documents, between 2017 and 2019, BIT Mining, then known as 500.com, admitted that its then-CEO Pan, employees, and agents, agreed to pay approximately $1.9 million in bribes and payments to intermediaries, knowing the money would be used to make bribe payments to Japanese government officials.
The purpose of the bribes was to try to help 500.com win a bid to open an integrated resort (a large resort that includes hotels, casinos, retail, dining, convention facilities, and entertainment venues) in Japan.
On behalf of 500.com, Pan allegedly engaged third-party consultants to assist 500.com in paying and concealing these bribes. 500.com, through these consultants, paid bribes in the form of cash, travel, entertainment, and gifts.
Pan and others allegedly covered up the payment of these bribes by, among other things, entering into sham contracts with the consultants and falsely recording the payments as legitimate expenses, including as management advisory fees.
Ultimately, despite carrying out this bribery scheme, 500.com did not win an integrated resort bid in Japan.
Pursuant to the DPA, BIT Mining agreed, based on the application of the U.S. Sentencing Guidelines, that the appropriate criminal penalty is $54 million.
However, due to BIT Mining’s financial condition and demonstrated inability to pay the penalty calculated under the U.S. Sentencing Guidelines, BIT Mining and the Justice Department agreed, consistent with the department’s inability to pay guidance, that BIT Mining will pay a total criminal penalty of $10 million. The Justice Department has agreed to credit up to $4 million against the civil penalty BIT Mining has agreed to pay to the SEC to resolve a parallel investigation.
BIT Mining has also agreed to continue to cooperate with the Fraud Section and the U.S. Attorney’s Office for the District of New Jersey in any ongoing or future criminal investigations.
In addition, BIT Mining has agreed to continue to enhance its compliance programs and provide reports to the Justice Department regarding remediation and the implementation of compliance measures for the three-year term of the DPA.
The Justice Department reached this resolution with BIT Mining based on a number of factors, including, among others, the nature and seriousness of the offense.
BIT Mining received credit for its cooperation with the department’s investigation, which included voluntarily producing relevant documents, financial data, and other information, including from foreign countries, while navigating some foreign data privacy and related criminal laws, accompanied by translations of a limited number of documents; and providing the government with facts learned during its internal investigation.
The cooperation was, however, reactive and limited in degree and impact.
BIT Mining engaged in certain timely remedial measures, which included, among other things, increasing governance and oversight of compliance risks and audit findings by the board of directors, promoting compliance and ethics through company-wide communications, incorporating compliance criteria in performance evaluations for senior management, conducting annual risk assessments, creating an anti-corruption policy and engaging in company-wide training and communications to promote it, and transitioning its business model to an industry that presents a lower corruption risk and reducing its presence in high risk regions.
In light of these considerations, BIT Mining’s criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 10% reduction off the bottom of the applicable guidelines fine range.
The FBI’s International Corruption Unit is investigating the case.
