On November 18, 2024, federal prosecutors in New Jersey unsealed an indictment charging Zhengming Pan, a Chinese national, with violations of the Foreign Corrupt Practices Act for his role in a scheme to pay bribes to Japanese government officials. The U.S. Department of Justice reported that Pan, the former CEO of 500.com (now BIT Mining Ltd.), had been indicted by a federal grand jury in June 2024 and charged with one count of conspiracy to violate 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 for his role in the scheme.
Federal prosecutors also filed a criminal information charging BIT Mining, a cryptocurrency mining company, 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. However, the company entered into a three-year deferred prosecution agreement (“DPA”) to resolve the charges.
As part of the DPA, BIT Mining admitted that, from approximately 2017 to around December 2019, 500.com executives knowingly and willfully conspired with others to pay approximately $1.9 million to third-party consultants with the understanding that the funds would be used to pay bribes to Japanese government officials. The corrupt payments were allegedly made to enable 500.com, an online sports lottery service provider based in China, to win a bid to open an integrated resort, including hotels, casinos, dining and other forms of entertainment, in Japan. According to federal prosecutors, Pan caused 500.com to engage third-party consultants to pay bribes in the form of cash, travel, entertainment and gifts to certain members of the Japanese National Diet in order to gain an improper business advantage to win the bid. To conceal the improper payments, Pan and his co-conspirators allegedly created false and misleading invoices and falsely recorded the payments as management advisory fees and other legitimate business expenses. Despite these efforts, 500.com did not win the integrated resort bid.
The DOJ reached a resolution with BIT Mining after considering a number of factors, including the nature and seriousness of the offense. The DOJ also confirmed that BIT Mining received credit for cooperating with federal investigators by voluntarily producing financial data and other relevant documents and information obtained by BIT Mining during an internal investigation conducted by the company. The company also received a 10 percent reduction off the bottom end of the applicable guidelines fine range for engaging in certain timely remedial measures, including the creation of an anti-corruption policy, company-wide distribution of communications promoting compliance and ethics, and conducting annual risk assessments.
Under the terms of the DPA, BIT Mining agreed to cooperate with the DOJ on any ongoing and future criminal investigations, continue to enhance its compliance program, and provide the DOJ with reports regarding its remediation and compliance improvement efforts throughout the DPA’s three-year term. The DOJ also reported that, while BIT Mining agreed a $54 million criminal penalty was appropriate in this case, the company reached an agreement with the DOJ to pay a total of $10 million after demonstrating its inability to pay the original penalty amount. The DOJ also agreed to credit the company up to $4 million for any civil penalty paid to resolve a parallel investigation launched by the Securities and Exchange Commission.
On November 18, 2024, the SEC announced that BIT Mining had agreed to pay a $4 million civil penalty to resolve allegations that the company engaged in a wide-spread bribery scheme involving approximately $2.5 million in illicit payments in the form of cash, entertainment, and extravagant trips. The SEC also found that the bribes had been authorized by a senior executive of 500.com. In addition to the payment of the civil penalty, BIT Mining consented to the entry of an order finding that it violated the anti-bribery, recordkeeping and internal accounting controls provisions of the FCPA and agreed to cease-and-desist from committing further FCPA violations. The order also reflects that the SEC considered 500.com’s cooperation with investigators and remedial efforts when accepting the offer of settlement, including the company’s decision to dispose of its entire lottery-related business in July 2021 and the fact that the executives responsible for the misconduct are no longer employed by the company.
DOJ Press Release | Unsealed Indictment – Pan | Deferred Prosecution Agreement – BIT Mining | Information – BIT Mining | SEC Press Release | SEC Order