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.
Telefónica Venezolana Resolves $85 Million Enforcement Action
Approximately ten years ago, a Venezuelan telecommunications company (a wholly-owned subsidiary of a Spanish telecommunications) allegedly bribed Venezuelan officials.
The end result is a $85 million U.S. Foreign Corrupt Practices Act enforcement action against the Venezuelan telecommunications company.
The DOJ recently announced that “Telefónica Venezolana C.A. (Telefónica Venezolana), a Venezuela-based subsidiary of Telefónica S.A. (Telefónica), a publicly traded global telecommunications operator based in Spain, will pay over $85.2 million to resolve an investigation by the Justice Department into a scheme to bribe government officials in Venezuela to receive preferential access to U.S. dollars in a currency auction.
The root cause of many FCPA enforcement is a real-world business condition and in this regard the following is relevant to the Telefónica Venezolana enforcement action.
The Delisting Of Foreign Issuers In The Aftermath Of FCPA Scrutiny Or Enforcement
Foreign issuers (that is companies with shares traded on a U.S. exchange) are subject to the Foreign Corrupt Practices Act.
The mere listing and trading is all that is required under the FCPA’s books and records and internal controls provisions for jurisdiction.
In contrast. the anti-bribery provisions – as applicable to foreign issuers – have the following jurisdictional requirement: “use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance” of a bribery scheme. Thus, as frequently highlighted on these pages, it is a myth that the FCPA’s anti-bribery provisions are extraterritorial as to foreign issuers. Nevertheless, it is true that the FCPA enforcement agencies take a very broad view of its jurisdiction over foreign issuers.
SEC Commissioner Uyeda On Foreign Company Disclosures
Recently, various SEC officials have delivered speeches in connection with the 90th anniversary of the Securities and Exchange Commission (SEC).
This speech by SEC Commissioner Mark Uyeda focused on foreign company disclosures.
In recent years, approximately 1,000 foreign companies (the number fluctuates each year) have shares traded on a U.S. exchange and thus qualify as “issuers” making such companies subject to a variety of securities laws including the Foreign Corrupt Practices Act.
The FOREIGN Corrupt Practices Act
Since 2021, the DOJ has resolved 19 corporate Foreign Corrupt Practices Act enforcement actions.
The “Foreign” in Foreign Corrupt Practices Act refers to the location of the bribe recipient (as in “foreign” non-U.S. officials).
However, the “Foreign” in Foreign Corrupt Practices Act might as well refer to the location of the bribe payor as well – in other words the location of the company resolving the FCPA enforcement.
As highlighted below, of the 19 DOJ corporate FCPA enforcement actions since 2021, 14 of the 19 enforcement actions (74%) have involved foreign companies.
Set forth below are the 19 corporate DOJ FCPA enforcement actions since 2021 along with a general description of the company involved.