Chinese gaming company discloses resignation of auditor over allegedly improper payments

On September 28, 2020, 500.com Limited, an online sports lottery service provider based in Shenzhen, China, reported in a filing with the US Securities and Exchange Commission that its auditor, Friedman LLP, had resigned due to a disagreement with 500.com over the effectiveness of the company’s internal controls.  Specifically, the auditor withdrew after allegedly unlawful payments by three former consultants of the company were disclosed.  As reported by 500.com, the alleged payments were made in connection with the development of a casino and resort  in Japan.  500.com said that the payments were disclosed to the SEC through Form 6-K filings in December 2019 and January 2020, and an outside law firm was engaged to investigate the consultants’ conduct.  500.com added that the company has hired a new auditor and that to-date no violations of the US Foreign Corrupt Practices Act have been identified.

500.com also disclosed that Friedman had advised 500.com that because some of the allegedly improper payments had been made in 2017 and 2018 and that Friedman had not been aware of the payments at that time, Friedman’s audit reports of 2017 and 2018 could no longer be relied upon.  500.com stated that it disagreed with this conclusion. 

Form 6-K | 500.com press release 

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