As its participation in a Japanese political scandal deepens, Chinese online gambling operator 500.com has to deal with losing its two most senior executives.
The Nasdaq-listed 500.com announced on New Year’s Eve, that it had formed a Special Investigation Committee (SIC) to “internally investigate alleged illegal money transfers and the role played by consultants” in the growing scandal related to allegations of bribery of Japanese lawmakers.
Following 500.com’s announcement, Tusaka Akimoto, a politician in Japan’s ruling Liberal Democratic Party (LDP), who previously held a cabinet position with a direct role in the country’s plans to authorize three integrated resort casinos, was arrested on Christmas Day.
Also, three current and ex 500.com consultants were arrested under suspicion of channeling nearly ¥3.7m (US$34k) to Akimoto to expediate the company’s pursuit of a casino license in Hokkaido. Although Akimoto has denied any guilt, he resigned from the LDP after his arrest.
Japanese media reported On Thursday, that Katsunori Nakazato, one of these consultants, had also given five other legislators ¥1m in cash each in September 2017. One of these lawmakers confessed to meeting with Nakazato; however, denied receiving “even a penny” from 500.com.
Also, 500.com’s New Year’s Eve announcement disclosed that Xudong Chen, its chairman had resigned on December 30. The company claimed that Chen’s departure was “not based on any disagreement with the company on any matter related to its business, finance, accounting and/or any other affairs.”
As reported by calvinayre.com, Chen’s chairman post will be filled by Shengwu Wu, executive VP of Chinese state-owned Tsinghua Unigroup, which took a share in 500.com in 2015 and controls one-third of the company currently. Chen had taken on the chairman role just last June, making Wu the fifth person in four years to fill the chairman’s post.
500.com also declared that its board had accepted a request by director/CEO Zhengming Pan to “temporarily step aside from his positions … until the conclusion of the SIC’s investigation in order to ensure a thorough and fair investigation.” Zhaofu Tian, the company’s current CTO has agreed to act as temporary CEO during Pan’s absence.
Throughout media coverage of the company’s participation in the scandal, 500.com’s share price had remained astonishingly stable. However, that changed after news of the management shakeup. By mid-day Thursday, 500.com’s shares were down almost 11%.
500.com previously operated online sports lotteries in China; however, in March 2015, Beijing suspended all online lottery sales, dealing a major blow to 500.com’s business model. The company has tried to diversify its revenue streams by buying European-facing online casino sites; however, these attempts haven’t stopped the falls in 500.com’s declining cash reserves.