The Crypto Desk

“Bit Mining Settles $4 Million SEC Case Amid Bribery Allegations in Japan”

Overview of BIT Mining’s Legal Troubles

BIT Mining, which was previously known as the Chinese online sports lottery service provider 500.com, has recently settled a significant bribery case with the U.S. Securities and Exchange Commission (SEC). The settlement includes a $4 million civil penalty for breaching the Foreign Corrupt Practices Act (FCPA). This settlement comes in light of serious allegations surrounding a bribery scheme that unfolded between 2017 and 2019, primarily aimed at influencing Japanese government officials to secure a license for an Integrated Resort (IR) that included a casino.

Details of the Bribery Scheme

During the period of 2017 to 2019, while operating under the name 500.com, BIT Mining aimed to obtain a license for an Integrated Resort in Japan following the country’s recent legalization of gambling. The company allegedly provided $2.5 million in bribes to various Japanese officials, including members of parliament, to sway important licensing decisions. These illicit payments were cleverly disguised through fake consulting agreements and management advisory fees. The scheme involved lavish gifts, extravagant trips, and cash payments, all intended to influence key decision-makers in favor of the company.

Involvement of High-Level Executives

The orchestrations of the bribery scheme were reportedly directed by then-CEO Zhengming Pan, who now faces multiple charges for his involvement in the scandal. Court documents indicate that Pan not only sanctioned the bribery but actively facilitated it by instructing consultants to make the payments while manipulating financial records to hide the illegal transactions. The establishment of a Japanese subsidiary, 500.com Nihon, served to streamline these corrupt activities, allowing for more efficient fund allocation and manipulation.

Consequences of the Bribery Attempt

As the illegal activities came to light, the fallout was substantial. In late 2019, Tokyo prosecutors executed a raid on 500.com’s offices, leading to the prosecution of government officials who accepted bribes, as well as indictments against consultants associated with the company. Despite the extensive bribery efforts, 500.com ultimately failed to secure the desired IR license, rendering their actions not just illegal but also ineffectual and fruitless.

Settlements and Penalties

The legal ramifications for BIT Mining were extensive, culminating in a settlement agreement with U.S. authorities. Initially, the Department of Justice (DoJ) proposed a hefty penalty of $54 million as per the U.S. Sentencing Guidelines. However, due to BIT Mining’s financial difficulties, this amount was negotiated down to a $10 million criminal penalty. Additionally, the SEC’s civil penalty of $4 million was accounted for within this total settlement amount, showcasing a coordinated approach between the two regulatory bodies.

Implications for Corporate Governance

U.S. Attorney Philip R. Sellinger remarked on the severity of the corruption scheme, emphasizing that it was executed at high leadership levels and severely compromised the integrity of both the company and the overall market. He stressed the seriousness of paying bribes to foreign officials, noting the top-down involvement of the company’s leadership in orchestrating the illegal payments and their subsequent concealment.

Future Compliance Measures

As part of the deferred prosecution agreement (DPA), BIT Mining is obliged to enhance its compliance framework significantly. The company has committed to establishing comprehensive anti-corruption policies, conducting training programs across the organization, and increasing oversight from its board of directors. Furthermore, BIT Mining plans to perform annual risk assessments and incorporate compliance criteria into evaluations of senior management, aiming to prevent similar incidents in the future.

Broader Industry Context

This situation reflects a growing concern regarding corporate ethics and compliance, drawing parallels with other high-profile corruption cases, such as the recent scandal involving the Colombian National Unit for Disaster Risk Management (UNGRD). In this case, a former deputy director admitted to using cryptocurrency to handle bribes amounting to around $1 million, indicating the pervasive nature of corruption across various sectors and regions.

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