As its role in a Japanese political scandal deepens, Chinese online gambling company 500.com has lost its two most senior executives.
The Nasdaq-listed 500.com reported on New Year’s Eve that it had set up 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 Japanese lawmakers ‘ corruption.
500.com’s announcement followed the Christmas Day arrest of Japan’s governing Liberal Democratic Party (LDP) lawmaker Tsukasa Akimoto, who had previously held a cabinet position with a direct role in the country’s plans to approve three integrated resort casinos.
Three current and former 500.com consultants were also arrested on suspicion of funnelling to Akimoto about 3.7 million yen (US$ 34k) to support the company’s pursuit of a Hokkaido casino licence. Upon his detention, Akimoto denied any wrongdoing but resigned from the LDP.
Japanese media revealed on Thursday that in September 2017, one of these consultants, Katsunori Nakazato, also handed over five other lawmakers 1 million yen in cash apiece. One of those lawmakers admitted meeting with Nakazato but declined to obtain “even a penny” from 500.com.
The announcement of 500.com’s New Year’s Eve also announced that its chairman, Xudong Chen, resigned on 30 December. The company clarified 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 chairmanship will be filled by Shengwu Wu, Chinese state-owned executive vice president Tsinghua Unigroup, who took a stake in 500.com in 2015 and currently owns one-third of the firm. Chen had assumed the role of chairman only last June, making Wu the fifth person to hold the chairman’s seat in four years.
500.com also announced that its board had approved a proposal from 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.” Current CTO Zhaofu Tian agreed to serve as interim CEO during the absence of Pan.
The share price of 500.com remained surprisingly stable throughout the media coverage of the company’s involvement in the scandal, but that changed after management shake-up news. At midday Thursday, 500.com’s shares were down about 11 percent.
In the past, 500.com handled online sports lotteries in China, but in March 2015, Beijing discontinued all online lottery sales. Through purchasing European-facing online casino sites, the organisation has sought to diversify its revenue streams, but these efforts have not prevented the declines in the diminishing cash reserves of 500.com.