Bribes, Resorts, & the High Price of Corruption: BIT Mining’s FCPA Scandal

What happens when a company bets big on bribery but loses the house? For BIT Mining Ltd., the answer is a bruising encounter with U.S. regulators. Formerly known as 500.com, the Chinese company has found itself at the heart of a sprawling corruption scandal, accused of paying nearly $2 million in bribes to Japanese officials to win a coveted casino contract. But the deal didn’t pan out, and now BIT Mining is paying the price— both financially and in terms of its reputation.

Between 2017 and 2019, BIT Mining’s leadership allegedly greenlit bribes disguised as consulting fees, luxury travel, and entertainment in an audacious attempt to secure the rights to build a lucrative integrated resort in Japan. According to the SEC and DOJ, these payments were orchestrated under the watchful eye of then-CEO Zhengming Pan, who now faces criminal charges.

The goal was clear - grease the wheels of Japanese bureaucracy to gain an unfair advantage. But the scheme backfired spectacularly, and despite the illicit payouts, BIT Mining walked away empty-handed—and right into the crosshairs of U.S. enforcement agencies.

Corporate Penalties & Personal Accountability

The fallout is as hefty as it is public, especially given the companies recent financial troubles. BIT Mining has agreed to a three-year deferred prosecution agreement (DPA) with the DOJ, admitting to its role in the bribery scheme and shelling out $10 million in criminal penalties. Thanks to its financial troubles, that figure is significantly reduced from the $54 million initially calculated under federal sentencing guidelines.

But regulators didn’t stop at the company. An indictment unsealed today charged Pan with FCPA violations, alleging he masterminded the plot to funnel bribes through third-party consultants while meticulously covering his tracks. If convicted, he faces years in prison—a stark warning that top executives aren’t immune from legal accountability.

“BIT Mining, under the alleged direction of then-CEO Zhengming Pan, agreed to pay nearly $2 million in bribes to Japanese government officials,” remarked Nicole M. Argentieri, Principal Deputy Assistant Attorney General of the DOJ. “Today’s resolution and the charges against Pan demonstrate the department’s continued commitment to holding both corporate and individual wrongdoers accountable for their crimes.”

If the DOJ’s $10 million fine wasn’t enough to get BIT Mining’s attention, the SEC’s $4 million civil penalty should do the trick. The SEC’s order forces BIT Mining to stop violating the FCPA and get its compliance act together. As part of its settlement, BIT Mining agreed to cease and desist from further violations and strengthen its internal controls to align with FCPA requirements. The $4 million civil penalty will partially offset the $10 million criminal fine levied by the DOJ, showcasing the collaborative muscle of U.S. enforcement agencies.

“Bribery and corruption don’t just skew markets; they shatter investor trust,” said Charles E. Cain, who heads the SEC’s FCPA Unit. Cain didn’t mince words when calling out 500.com for its glaring lack of internal controls, which enabled top executives to pull off the scheme unchecked.

This saga isn’t just a lesson for BIT Mining—it’s a cautionary tale for any company tempted to grease palms in pursuit of international glory. No amount of luxury junkets or backroom deals can make up for the reputational fallout of getting caught. For BIT Mining, the dream of a Japanese casino jackpot has turned into a costly reminder that cutting corners can cut far deeper than expected.

Learning the Hard Way

For BIT Mining, the scandal has sparked an overhaul. The company has revamped its compliance programs, launched anti-corruption training initiatives, and shifted its business model to industries with lower corruption risk. These steps may be necessary for survival, but they can’t undo the damage to its reputation.

BIT Mining’s efforts to cooperate with investigators, though “reactive and limited” according to the DOJ, did earn it a 10% reduction in penalties. The company also pledged to continue working with regulators and strengthen its internal oversight to prevent future lapses.

This case isn’t just about one company’s misdeeds. It’s a cautionary tale for global businesses operating in high-risk regions, where the temptation to cut ethical corners can be strong.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.