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The former CEO of a once-high-flying company that led online lottery operations in China and eyed integrated resort operations in Japan has been indicted in the US for allegedly bribing Japanese officials.
The US Department of Justice on Monday (November 18) announced a federal grand jury indictment of Pan Zhengming, former CEO of 500.com, now trading as BIT Mining, for four breaches of the Foreign Corrupt Practices Act (FCPA).
The four counts against Pan include one count of conspiracy to breach FCPA provisions and three counts of violating the FCPA’s anti-bribery and books and records provisions, according to a department statement.
BIT Mining, meanwhile, has agreed to a three-year deferred prosecution over two charges of conspiracy to violate, and violation of, FCPA provisions.
The justice department and BIT Mining agreed to reduce its criminal penalty from $54m to $10m in view of its “financial condition” and “demonstrated inability to pay the penalty”.
But BIT Mining must also continue to cooperate in “any ongoing or future criminal investigations” and undertake a transparent programme of remediation during the three-year deferral.
The $10m fine will include a credit of $4m that BIT Mining will pay the Securities and Exchange Commission (SEC) to resolve the latter’s civil probe into the company, the SEC said in a separate statement on Monday.
The justice department alleged Pan was at the centre of Shenzhen-based 500.com’s three-year campaign of bribing Japanese officials and lawmakers to gain one of three integrated resort licences on offer from the central government.
“BIT Mining, under the alleged direction of then-CEO Zhengming Pan, agreed to pay nearly $2m in bribes to Japanese government officials to win a contract to open a lucrative resort and casino in Japan,” Criminal Division head Nicole M. Argentieri said.
“Pan has been indicted for his alleged role in directing company consultants to pay the bribes and to conceal the illicit payments through sham consulting contracts.”
Philip R. Sellinger, US attorney for the District of New Jersey, said: “The illegal scheme started at the top, with the company’s CEO allegedly fully involved in directing the illicit payments and the subsequent efforts to conceal them.”
The justice department statement added that 500.com’s consultants, acting under instruction from 500.com, “paid bribes in the form of cash, travel, entertainment, and gifts”, whose amounts were then “falsely recorded as legitimate expenses, including as management advisory fees”.
It was not immediately clear if Pan, a Chinese national, is in the US or if his movements are restricted.
The failure of 500.com’s campaign to secure an IR foothold in Hokkaido inflicted considerable damage on Tokyo’s national IR campaign, filling local media headlines with the investigation and jailing of the government’s IR policy chief and bribe recipient Tsukasa Akimoto.
Akimoto was sentenced to four years in prison in 2021 for receiving cash and gifts from 500.com’s intermediaries totalling ¥7.6m (then $70,000). Akimoto was also found to have attempted to interfere with the intermediaries after they were called as witnesses.
The former vice defence minister was head of the Ministry of Land, Infrastructure, Transport and Tourism when the offences occurred, and his downfall delayed the government’s IR tender process by forcing changes to its IR Basic Policy, while worsening the initiative’s optics in mass media.
All other suspects in the case, including Japanese and Chinese contractors, received suspended sentences.
500.com peaked as a corporate entity when it obtained one of two Chinese government licences to steer the nation’s nascent online lottery market.
But Beijing imposed a moratorium on the segment in 2015, a de facto ban that has never been lifted, forcing New York-listed 500.com to look further afield for revenue.
