Earlier this year, Bit Mining and its CEO fell under the FCPA hammer.  Bit Mining, formerly known as 500.com, resolved investigations with the Justice Department and the SEC for its corrupt scheme to bribe Japanese government officials.  On the same date, DOJ announced the indictment of Zhengming Pan, Bit Mining’s former CEO and a Chinese national, for FCPA violations. 

BIT Mining entered into a three-year deferred prosecution agreement (DPA) in tandem with the filing of a criminal information in the District of New Jersey charging BIT Mining with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the books and records provisions of the FCPA. As part of the settlement, Bit Mining agreed to pay a fine of $10 million, after DOJ agree that Bit Mining was unable to pay a $54 million fine, as mandated by the US Sentencing Guidelines.  Bit Mining agreed to settle the SEC case for $4 million.  DOJ agreed to credit the $4 million civil penalty against the $10 million criminal fine.

Pan is 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.

As alleged, between 2017 and 2019,  Pan supervised the payment of $2 million in bribes to Japanese government officials to win a contract to open a lucrative resort and casino in Japan.  Pan employed company consultants to funnel these bribery payments and then disguised the illegal funding of the bribes through sham consulting contracts.

The Japanese resort included hotels, casinos, retail, dining, convention facilities and entertainment venues.  Pan’s bribery payments were made in the form of cash, travel, entertainment, and gifts. Pan and others allegedly covered up the payment of these bribes by, among other things, entering into sham contracts with the consultants and falsely recording the payments as legitimate expenses, including as management advisory fees. Ultimately, 500.com did not win the integrated resort bid in Japan.

BIT Mining agreed to continue to enhance its compliance programs and provide reports to the Justice Department regarding remediation and the implementation of compliance measures for the three-year term of the DPA.

Under the Corporate Enforcement Program factors, DOJ cited ‘s cooperation credit stemming from its  (i) voluntarily producing relevant documents, financial data, and other information, including from foreign countries, while navigating some foreign data privacy and related criminal laws, accompanied by translations of a limited number of documents; and (ii) providing the government with facts learned during its internal investigation. The cooperation was, however, reactive and limited in degree and impact.

Further, BIT Mining engaged in certain timely remedial measures, which included, among other things, (i) increasing governance and oversight of compliance risks and audit findings by the Board of Directors, (ii) promoting compliance and ethics through company-wide communications, (iii) incorporating compliance criteria in performance evaluations for senior management, (iv) conducting annual risk assessments, (v) creating an anti-corruption policy and engaging in company-wide training and communications to promote it, and (vi) transitioning its business model to an industry that presents a lower corruption risk and reducing its presence in high risk regions. In light of these considerations, BIT Mining’s criminal penalty calculated under the U.S. Sentencing Guidelines reflected a 10% reduction off the bottom of the applicable guidelines fine range.