US Indicts Former 500.com CEO for Bribery Linked to Japan's Casino Plans
An indictment has been unsealed charging Zhengming Pan, the former CEO of 500.com, now operating as BIT Mining Ltd., with multiple violations of the Foreign Corrupt Practices Act (FCPA). The charges are part of a broader investigation into a bribery scheme aimed at influencing Japanese government officials to secure contracts for the development of an integrated resort and casino in Japan.
The Department of Justice's plaque on the wall of its headquarters in Washington, DC. (Source: Shutterstock)
LISTEN TO THIS ARTICLE:According to court filings, a federal grand jury in the District of New Jersey indicted Pan on June 18, accusing him of conspiracy to violate the anti-bribery and books and records provisions of the FCPA, violating the anti-bribery provisions, and additional breaches of the FCPA's books and records rules. The charges allege that between 2017 and 2019, under Pan's leadership, the company conspired to pay approximately $1.9 million in bribes to Japanese officials and intermediaries to secure a bid for a lucrative integrated resort project.
Related: MGM's Osaka IR to Begin Breaking Ground Within DaysThe indictment claims that Pan and others employed third-party consultants to facilitate the payments and conceal them through fraudulent consulting contracts. These bribes were reportedly disguised as legitimate expenses, including management advisory fees, and provided in the form of cash, entertainment, travel, and gifts. Despite the extensive bribery scheme, 500.com ultimately failed to win the bid to establish the resort in Japan.
BIT Mining has entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice. In doing so, it has admitted to one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the FCPA's books and records requirements.
Under the DPA, the company has agreed to a criminal penalty of $54 million but will pay only $10 million due to its demonstrated financial inability to pay the full amount. Additionally, the company has committed to enhancing its compliance programs and will report on its progress to the Justice Department during the DPA's term.
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Charges on Multiple Fronts
The SEC's investigation into the matter also led to BIT Mining agreeing to pay a $4 million civil penalty. The SEC determined that the company engaged in a widespread bribery scheme involving approximately $2.5 million in illicit payments to influence foreign officials, including members of Japan's parliament.
The SEC found deficiencies in 500. com's internal controls that allowed senior executives to authorize and execute these payments. BIT Mining consented to an order from the SEC requiring it to cease violations of the FCPA and address its internal accounting practices.
The Justice Department credited BIT Mining for its partial cooperation in the investigation, which included providing documents and internal findings. However, the cooperation was noted as reactive and limited. The company has pledged to continue cooperating with ongoing investigations and to make significant improvements to its compliance infrastructure.
BIT Mining, when operating as 500.com, was headquartered in Shenzhen, China, and traded on the New York Stock Exchange under the symbol "WBAI" during the period in question. The company's integrated resort project in Japan included plans for hotels, casinos, retail, dining, and entertainment facilities. Despite significant efforts to secure the project through illicit means, the company did not succeed.
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