Crypto Firm Settles FCPA Charges, Former CEO Accused of Paying Foreign Bribes
The former CEO of 500.com, which now operates as crypto mining company BIT Mining Ltd., was charged with violating the Foreign Corrupt Practices Act by paying bribes to Japanese government officials, DOJ announced. In addition, BIT Mining agreed to settle DOJ and SEC investigations into its FCPA violations, entering into a three-year deferred prosecution agreement with DOJ.
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In an indictment unsealed Nov. 18, the U.S. alleged that former CEO Zhengming Pan, a Chinese national, paid around $1.9 million to intermediaries knowing the money would be used to bribe foreign officials to help win 500.com a bid to open a hotel and entertainment resort in Japan.
Pan faces one count of conspiracy to violate the FCPA's anti-bribery and books records provision, one count of violating the anti-bribery provisions and two counts of violating the act's books and records provisions.
From 2017 to 2019, BIT Mining admitted that Pan and company employees and agents paid bribes to Japanese government officials, DOJ said. Pan allegedly "engaged third-party consultants" to help the company pay and hide the bribes. The bribes were paid in the form of "cash, travel, entertainment, and gifts," DOJ said. The bribes were hidden through fake contracts with the consultants that falsely recorded the payments as "legitimate expenses, including as management advisory fees," DOJ said. Despite paying the bribes, 500.com failed to win the resort bid.
BIT Mining agreed that the "appropriate criminal penalty is $54 million," though due to the company's "demonstrated inability to pay the penalty," the parties agreed that the company will pay a $10 million penalty, DOJ said. The agency credited up to $4 million against the civil penalty that BIT Mining agreed to pay the SEC to settle a parallel investigation.
The company also agreed to continue cooperating with the U.S. Attorney's Office for the District of New Jersey in any current or future investigations, adding that it will also enhance its compliance programs and provide reports to DOJ on the implementation of these measures during the course of the deferred prosecution agreement. DOJ said BIT Mining got credit for its cooperation with the investigation, which included "voluntarily producing relevant documents, financial data, and other information" and provided the U.S. with facts gleaned from its internal investigation.
BIT Mining's agreed to boost the governance and oversight of compliance risks by the board of directors, enhance compliance through "company-wide communications," including compliance criteria in performance reviews for top management, conduct annual risk assessments, establish an "anti-corruption policy" with company-wide training and transition its "business model to an industry that presents a lower corruption risk."
A BIT Mining spokesperson didn't immediately respond to a request for comment.