Cryptocurrency mining company BIT Mining Ltd. (500.com) settles FCPA enforcement actions with DOJ and SEC in Japan bribery scheme

On November 18, 2024, the DOJ and SEC announced the settlement of enforcement actions against BIT Mining Ltd., formerly known as 500.com, and the indictment of the company’s former CEO, Zhengming Pan. The government alleged that between 2017 and 2019, 500.com, an online sports lottery service provider, paid between US$1.9 and US$2.5 million in bribes to intermediaries, knowing that the money would be used to bribe Japanese government officials as part of 500.com’s ultimately unsuccessful bid to build an integrated resort featuring hotels, casinos, and entertainment venues in Japan. The company’s senior leadership, including the company’s former CEO, allegedly approved and was fully involved in the scheme. 

In furtherance of the scheme, 500.com engaged third-party consultants to assist in paying bribes to government officials in the form of cash, wire transfers, gifts, travel, and entertainment. To conceal the bribes, 500.com created misleading contracts, invoices, and billing documents, while falsely recording the payments as legitimate expenses, such as consulting payments and management advisory fees. Of note, Japanese prosecutors have charged multiple officials, including a member of Japan’s parliament, in connection with the bribery scheme, and at least two Japanese nationals were convicted of accepting bribes from 500.com and sentenced to prison. 

In connection with the three-year deferred prosecution agreement (DPA) to resolve the U.S. criminal charges, BIT Mining admitted to making payments knowing that they would be given to Japanese government officials as bribes. The company agreed to cooperate with DOJ in ongoing criminal investigations, enhance its compliance programs, and provide reports to the DOJ regarding remediation and the implementation of compliance measures. Pursuant to the DPA, BIT Mining also agreed that a US$54 million penalty was appropriate; however, due to the company’s financial condition and inability to pay, DOJ agreed to a total penalty of US$10 million. The company also settled the SEC’s investigation into the same alleged conduct by agreeing to a cease and desist order and paying a US$4 million civil penalty, which will be credited against the US$10 million DOJ penalty.

BIT Mining’s cooperation efforts included: (i) voluntarily producing relevant documents, financial data, and other information, including from foreign countries, while navigating foreign data privacy and related criminal laws; and (ii) providing the government with facts learned during its internal investigation. Additionally, the company’s remedial measures included: (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 the policy; and (vi) transitioning its business model, which included disposing of the entire lottery-related business in 2021 and reducing its presence in high-risk regions.

The BIT Mining DPA, the related indictment of its former CEO, and the SEC’s parallel action represent a continuation of sustained DOJ and SEC enforcement efforts – targeting both corporations and individuals, while recognizing and accounting for genuine compliance enhancement efforts. Although the recent U.S. elections have again raised questions around trends in U.S. enforcement – including in the context of the FCPA – companies with global operations are well-advised to continue their efforts at compliance enhancement. Under the Trump administration, this assessment applies with (at least) equal force to non-U.S. companies that, through their activities, may still fall within the scope of the FCPA and that otherwise may face prosecution in other countries in which they operate. With our global presence, including in numerous higher-risk markets, lawyers at Hogan Lovells are well-positioned to help companies strengthen their internal compliance programs to mitigate exposure and proactively detect, prevent, and investigate misconduct.

Authored by Ann Kim, Matthew Sullivan, Rupinder Garcha, and Cameryn Lonsway.