Japanese crypto companies are facing significant challenges as two high-profile projects encounter setbacks. DMM Crypto has announced the discontinuation of its Seamoon Protocol, a Web3 gaming and content ecosystem, citing rapid changes in the business environment. Meanwhile, Bitcoin mining firm BIT Mining admitted to bribing Japanese politicians between 2017 and 2019 in a failed bid to secure a casino and resort license, resulting in substantial fines to US authorities.
BIT Mining Admits to Bribery Scandal, Agrees to $10 Million Fine
BIT Mining, a prominent Bitcoin mining firm, has acknowledged paying bribes to Japanese politicians between 2017 and 2019 in a failed bid to secure a resort and casino license in Japan. The firm, previously operating as 500.com, a Chinese online sports lottery company, has agreed to pay $10 million in fines to resolve criminal and civil charges brought against it by the US government.
The illicit payments, totaling approximately $2.5 million, were used to influence Japanese politicians through cash bribes, entertainment, and luxury trips. The US Securities and Exchange Commission (SEC) released a statement on Nov. 18 detailing the extent of the corruption.
As part of the settlement, BIT Mining will pay a $4 million civil penalty to the SEC. Additionally, the company will pay a $10 million criminal fine to the US Department of Justice (DOJ), though $4 million of that amount will be credited from the civil penalty paid to the SEC.
The DOJ also filed charges against Zhengming Pan, the former CEO of 500.com, accusing him of orchestrating the bribery scheme. Pan reportedly used “sham contracts” with third-party consultants to funnel illicit payments. These payments were disguised as legitimate business expenses in the company’s records, according to the DOJ.
The bribes were part of an ambitious plan to secure a lucrative contract for a resort in Japan that would feature casinos, hotels, retail spaces, dining establishments, and entertainment venues. Despite the significant resources allocated to influence politicians, the firm ultimately failed to win the bid.
US Attorney Philip Sellinger of the District of New Jersey emphasized the gravity of the offense, stating, “Paying bribes to foreign government officials is a serious crime.” Charles E. Cain, Chief of the SEC’s Enforcement Division, echoed this sentiment, noting that corruption undermines investor trust in public companies:
“Bribery and corruption turn that dynamic on its head, distorting the orderly operation of the markets and undermining investor confidence.”
Under US Sentencing Guidelines, BIT Mining could have faced a $54 million criminal fine. However, the penalty was significantly reduced due to the company’s financial difficulties and inability to pay the full amount.
BIT Mining pivoted to Bitcoin mining in December 2020 and rebranded itself three months later in March 2021. This marked a significant strategic shift for the company as it moved away from its roots in the online sports lottery industry.
Market Reaction
Following the announcements by the SEC and DOJ, BIT Mining’s shares (BTCM) dropped 6.3% in after-hours trading, according to Google Finance data. The market’s reaction indicates a negative sentiment surrounding the bribery revelations and their potential impact on the company’s reputation and financial standing.
The scandal shines the spotlight on the ongoing concerns about corruption and unethical practices in industries aiming to expand into new markets. Regulatory bodies, including the SEC, have reiterated their commitment to cracking down on such practices to ensure fair competition and market integrity.
The case also serves as a warning to public companies about the severe consequences of engaging in bribery and corruption. As Cain remarked, public companies are expected to operate with merit and integrity, and actions that deviate from these principles have far-reaching consequences.
BIT Mining’s bribery scandal brings attention to the risks associated with unethical business practices. While the company’s financial penalties have been mitigated due to its current financial condition, the reputational damage and market backlash could have lasting implications. As the Bitcoin mining industry continues to develop, BIT Mining will need to rebuild investor trust and navigate regulatory scrutiny as it moves forward.
DMM Crypto Shuts Down Seamoon Protocol Amid Market Challenges
In related news, Japanese cryptocurrency platform DMM Crypto has announced it is discontinuing the Seamoon Protocol, a Web3 gaming and content ecosystem launched just five months ago. The company revealed that no new services will be introduced to the platform, while the future of existing services remains uncertain.
The Seamoon Protocol was built around the SMP token within the DM2 Verse, hosted on the Oasys layer-2 blockchain. It aimed to integrate Web3 gaming, anime content, and digital transactions. A standout feature was the Seamoon Portal, which showcased games and anime produced by DMM.com, a major Japanese e-commerce and internet conglomerate.
In October, the ecosystem launched its first Web3 game, Kanpani Girl Re:Bloom, with plans to release four more games on the protocol. However, in light of the project’s termination, Kanpani Girl Re:Bloom will cease operations on Jan. 31, 2025, leaving the fate of the planned games in limbo.
DMM Crypto cited ”rapid changes in the business environment” as the reason behind the protocol’s early termination but did not elaborate on the specific challenges. The company emphasized that sustaining the ecosystem had become increasingly difficult.
In August, DMM Crypto was working with Progmat, a stablecoin platform, to introduce its own stablecoin to enhance the Seamoon Protocol’s financial ecosystem. The proposed stablecoin was intended to function alongside fiat currency and credit card payments, potentially opening new revenue streams and driving user adoption. However, this plan was abandoned as the Seamoon Protocol struggled to achieve sustainability.
DMM Crypto is one of several cryptocurrency ventures under DMM.com. The exchange launched in January 2023 alongside the Seamoon Protocol, while DMM Bitcoin, another DMM.com crypto exchange, has been operational since September 2017. However, DMM Bitcoin faced a significant setback in mid-2024 when it was hacked for $302 million. The hack was attributed to North Korea’s Lazarus Group. Despite the loss, DMM.com compensated affected users to maintain customer trust.
DMM.com also experimented with crypto mining, operating a mining business from January 2018 to January 2019 before exiting the sector due to unfavorable market conditions.
Japan’s Evolving Crypto Landscape
The discontinuation of Seamoon Protocol comes at a time of heightened activity in Japan’s crypto industry. In September, Progmat, a former partner of the Seamoon Protocol, entered into a strategic partnership with Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank, and blockchain startup Datachain to develop a new stablecoin platform under the name Project PAX.
Additionally, Japan has been positioning itself as a leader in blockchain innovation, with regulatory clarity and industry partnerships driving the growth of Web3 initiatives. However, the challenges faced by DMM Crypto underline the volatile nature of the sector, where rapid shifts in market conditions can jeopardize even well-funded projects.
The sudden announcement of Seamoon Protocol’s termination has sparked disappointment among its community and users. Many had hoped the ecosystem would capitalize on Japan’s strong gaming culture and burgeoning interest in blockchain technology. The abrupt closure of Kanpani Girl Re:Bloom further raises concerns about the sustainability of blockchain-based gaming platforms, which often require long-term user engagement and financial backing to thrive.
While DMM Crypto has not disclosed the specifics of its plans for existing Seamoon Protocol users, the lack of clarity adds to uncertainties for stakeholders invested in the platform.
Despite this setback, DMM Crypto remains a significant player in Japan’s cryptocurrency ecosystem. Its affiliation with DMM.com and its experience navigating the industry’s challenges position it for potential recovery and future ventures. However, the failure of the Seamoon Protocol serves as a cautionary tale about the complexities of building sustainable Web3 ecosystems.
As DMM Crypto recalibrates its strategy, the broader implications for Japan’s crypto sector remain to be seen. With major financial institutions like Mitsubishi UFJ Bank and Mizuho Bank making strides in stablecoin innovation, the landscape for blockchain technology in Japan is far from static. Whether DMM Crypto can adapt and contribute to this evolving environment will be a story worth watching.
This article was originally Posted on Coinpaper.com
