Chinese online gambling operator 500.com has lost its two most senior executives as its involvement in a Japanese political scandal deepens.
On New Year’s Eve, the Nasdaq-listed 500.com announced that it had established a Special Investigation Committee (SIC) to “internally investigate alleged illegal money transfers and the role played by consultants” in the growing scandal involving allegations of bribery of Japanese lawmakers.
500.com’s announcement followed the Christmas Day arrest of Tsukasa Akimoto, a lawmaker in Japan’s ruling Liberal Democratic Party (LDP), who formerly held a cabinet position with a direct role in the country’s plans to authorize three integrated resort casinos.
Three current and former 500.com consultants were also arrested under suspicion of funneling around ¥3.7m (US$34k) to Akimoto to boost the company’s pursuit of a casino license in Hokkaido. Akimoto has denied any guilt but resigned from the LDP following his arrest.
On Thursday, Japanese media reported that one of these consultants, Katsunori Nakazato, had also handed five other legislators ¥1m in cash apiece in September 2017. One of these lawmakers admitted to meeting with Nakazato but denied receiving “even a penny” from 500.com.
500.com’s New Year’s Eve announcement also revealed that its chairman Xudong Chen had resigned on December 30. The company insisted 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.”
Chen’s chairman seat will be occupied by Shengwu Wu, executive VP of Chinese state-owned Tsinghua Unigroup, which took a stake in 500.com in 2015 and currently controls one-third of the company. Chen had only assumed the chairman role last June, making Wu the fifth person in four years to occupy the chairman’s seat.
500.com also announced that its board had accepted a request by director/CEO Zhengming Pan (pictured) to “temporarily step aside from his positions … until the conclusion of the SIC’s investigation in order to ensure a thorough and fair investigation.” The company’s current CTO Zhaofu Tian has agreed to act as interim CEO during Pan’s absence.
500.com’s share price had remained surprisingly stable throughout media coverage of the company’s involvement in the scandal, but that changed following news of the management shakeup. 500.com’s shares were down around 11% by mid-day Thursday.
500.com formerly operated online sports lotteries in China but Beijing suspended all online lottery sales in March 2015, dealing a major blow to 500.com’s business model. The company has attempted to diversify its revenue streams by acquiring European-facing online casino sites but these efforts haven’t stopped the declines in 500.com’s dwindling cash reserves.