An indictment was unsealed charging the former CEO of a bitcoin mining form with bribery violations and his company entered into a deferred prosecution agreement with the Justice Department.
The November 18 indictment charges Zhengming Pan, former CEO of 500.com (now BIT Mining Ltd.), a Chinese national, with multiple violations of the Foreign Corrupt Practices Act (FCPA).
Simultaneously, BIT Mining Ltd. has agreed to resolve investigations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC) concerning related FCPA violations, involving bribery of Japanese officials.
BIT Mining entered into a three-year deferred prosecution agreement (DPA) with the Department of Justice, acknowledging 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. As part of this resolution, the company will pay a $10 million penalty, reflecting its limited financial capacity.
A federal grand jury returned an indictment on June 18, charging Pan with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, along with separate counts of violating these provisions. The indictment alleges that, under Pan’s leadership,
BIT Mining paid approximately $1.9 million in bribes to Japanese officials between 2017 and 2019 in an attempt to secure a contract for developing an integrated resort in Japan. Allegedly, Pan orchestrated these payments through sham consulting contracts, falsely recorded as legitimate business expenses.
Principal Deputy Assistant Attorney General Nicole M. Argentieri emphasized that BIT Mining, under Pan’s direction, engaged in a scheme to influence foreign officials unlawfully. She stated, “These charges underscore the Department’s commitment to prosecuting corporate and individual violators of the FCPA.”
U.S. Attorney Philip R. Sellinger of the District of New Jersey reiterated, “The company has admitted to orchestrating a bribery scheme at the highest levels, involving direct participation by its former CEO.”
BIT Mining agreed, based on the application of the U.S. Sentencing Guidelines, that the appropriate criminal penalty is $54 million. However, due to BIT Mining’s financial condition and demonstrated inability to pay the penalty calculated under the U.S. Sentencing Guidelines, BIT Mining and the Justice Department agreed, consistent with the department’s inability to pay guidance, that BIT Mining will pay a total criminal penalty of $10 million. The Justice Department has agreed to credit up to $4 million against the civil penalty BIT Mining has agreed to pay to the SEC to resolve a parallel investigation.
Pursuant to the DPA, BIT Mining has agreed to implement enhanced compliance measures, cooperate with ongoing investigations, and report its compliance efforts over the next three years. The company’s cooperation included the production of documents and internal investigation findings, although characterized as reactive and limited in scope.
In addition to agreeing to remedial measures, BIT Mining has taken steps to reduce its exposure to corruption risks by restructuring its business model and focusing on regions with lower compliance challenges. These efforts were recognized with a 10% reduction in the criminal penalty under the U.S. Sentencing Guidelines.
The resolution with BIT Mining also provides a credit of up to $4 million against a parallel civil penalty imposed by the SEC.
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