Issues To Consider From The BIT Mining (500.com) Enforcement Action
This prior post highlighted the Foreign Corrupt Practices Act enforcement action against BIT Mining Ltd. (formerly known as 500.com) in connection with a failed Japan bribery scheme concerning efforts to obtain a license to operate a casino.
This post highlights additional issues to consider.
Japan
The enforcement action is believed to be the first in FCPA history concerning conduct in Japan.
Take away point. While certain countries have a higher bribery and corruption risk than others, bribery and corruption issues can arise in any country.
FCPA enforcement actions have involved conduct in approximately 90 countries including perceived low risk countries such Canada, United Kingdom, Netherlands, France and Germany.
500.com and the Specter of “Chinese-Issuer” Enforcement
A guest post from Eric Harris (a White Collar Defense Attorney and Anti-Corruption Compliance Consultant).
The DOJ and SEC recently announced an enforcement action against BIT Mining Ltd., which is the successor entity of 500.com. The action was brought against Bit Mining Ltd. due to 500.com’s migration from the online sports lottery business in 2021 to focus on cryptocurrency mining. 500.com’s activities are the focus of the agencies’ enforcement action against BIT Mining Ltd. as it is the responsible entity due to the nature of inherited FCPA violations. As such, 500.com is referred to as the entity at issue here.
Since the release of 500.com’s enforcement action, some have wondered whether the 500.com enforcement action is the first FCPA enforcement against a “Chinese issuer” (while acknowledging that 500.com was not technically a Chinese issuer). However, there are some practical reasons a similar enforcement action has not previously been brought with the fact pattern therein. Moreover, there are additional likely causes for the lack of a similar fact pattern in prior FCPA enforcement activity.
An FCPA First*
Foreign Corrupt Practices Act enforcement actions against a company based on the conduct of a Chinese subsidiary are numerous (including instances in which the Chinese subsidiary is part of the resolution process).
FCPA enforcement actions against Chinese companies for violations of the FCPA’s books and records and internal controls provisions outside the context of foreign bribery (so-called non-FCPA, FCPA enforcement actions) have occurred. (See here, here and here for instance).
The FCPA enforcement action earlier this week involving BIT Mining (500.com) is believed to be the first FCPA enforcement action in history to involve a “Chinese issuer.”
Well, sort of.*
At least as close to a “Chinese issuer” “resolving” an FCPA enforcement action without technically a “Chinese issuer” “resolving” an FCPA enforcement action.
BIT Mining (500.Com) Resolves FCPA Enforcement Action In Connection With Failed Japan Bribery Scheme
Yesterday the DOJ and SEC announced a net $10 million Foreign Corrupt Practices Act enforcement action against BIT Mining Ltd. (formerly known as 500.com) in connection with a failed Japan bribery scheme concerning efforts to obtain a license to operate a casino.
500.com was formerly an online sports lottery service provider incorporated in the Cayman Islands, with headquarters and major business operations in Shenzhen, China with American Depositary Shares (ADS) traded on the New York Stock Exchange (NYSE). 500.com is now known as BIT Mining, a crypto assets mining business incorporated in the Cayman Islands and headquartered in Ohio with ADSs traded on the NYSE.
The enforcement action involved a DOJ component (net $6 million – a $54 million criminal penalty, reduced to $10 million based on an inability to pay, and further reduced to $6 million reflecting a credit for the amount paid to the SEC) and an SEC component ($4 million civil penalty).
In addition, the DOJ announced that Zhengming Pan (a Chinese national and the former CEO of 500.com) was criminally indicted in June in connection with the same bribery scheme and charged with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA, one count of violating the anti-bribery provisions of the FCPA, and two counts of violating the books and records provisions of the FCPA.
Judge Recommends Dismissal Of 500.com Bribery Related Securities Fraud Suit
500.com is an online gaming company incorporated in the Cayman Islands with principal executives offices in China and shares traded on the New York Stock Exchange.
In a securities fraud class action lawsuit, investors claimed that the company and certain of its executives “made false statements, misrepresentations, and omissions in various SEC filings after paying bribes of millions of yen to government officials in Japan for the purpose of securing a lucrative license to operate a casino.” Specifically, the plaintiffs alleged that the company paid Tsukaka Akimoto, a member of Japan’s legislature who was in charge of awarding licenses to run integrated resorts, approximately 7.6 million yen which came in the form of compensation for speaking at a 500.com symposium, elaborate trips, and other gifts. Plaintiffs also alleged that 500.com paid bribes to five members of Japan’s parliament in exchange for preferential treatment related to the integrated resorts the licenses which totaled approximately 5 million yen.