Just as this year’s May Day holiday came to a close, attorney Pan Nanyu received a judgment from a Beijing court: Z was sentenced to one year and six months in prison, suspended, for the crime of contract fraud. With this, the special investigation into the “billion-yuan subsidy” scheme of a certain e-commerce giant—a case involving over 10 million yuan, three defendant entities, and 25 defendants—finally came to a close after nearly two years.
Z is a young woman in her early 20s who had been married for only a few months when she was arrested in June 2024. From her arrest to her release on bail, from charges of fraud to contract fraud, and from 365 days in detention to a suspended sentence—several key milestones marked this journey: the line-by-line verification of the audit report and the separation of “vegetable farming” orders; the legal battle over the characterization of the charges; the step-by-step progress of the review on the necessity of detention; a letter to the founder of the e-commerce giant; and finally, the granting of probation following two court hearings.
I
Caught Up in the Case Just Months After Her Wedding
In June 2024, police in a certain district of Beijing established a special task force to launch a coordinated crackdown on the “billion-yuan subsidy fraud case involving a major e-commerce giant.” The operation even made headlines on CCTV, with authorities publicly vowing to punish the offenders severely and make this case a textbook example.
Z, who had been attending a qualification exam training course in the provincial capital, had been looking forward to a career in the civil service. Unexpectedly, her peace was shattered by “uninvited guests” who had come all the way from Beijing; four or five police officers took her away. Her newlywed husband was unable to reach Z for a long time. After inquiring, he learned the reason and later told the lawyer: “We’ve only been married for a few months; we didn’t even have time for a honeymoon.”
To earn some pocket money, Z had casually joined a WeChat group for liquor merchants. Upon seeing information about “fake order” rebates, she followed her upline’s instructions and organized a network of “fake orderers” to place orders for Maotai liquor at an e-commerce store, which actually shipped bottled water instead. As a result, she was charged with defrauding the e-commerce platform of subsidies. Strangely, although Z had only profited a few thousand yuan in total, she unexpectedly became entangled in this fraud case involving tens of millions of yuan. The result was criminal detention, approval for arrest, and nearly a year in custody. During their first meeting, she wept repeatedly: “I didn’t know it was this serious; I thought it was just an online part-time job.”
II
Fatal Flaws in the Audit Report
Evidence is the core of any case, and the audit report serves as the primary basis for determining the amount of fraud. After reviewing it, Attorney Pan Nanyu discovered a serious flaw in the statistical logic: it lumped all orders labeled as “order padding” or “planting” into the total amount of subsidies defrauded, without distinguishing whether the orders were actually fulfilled. Here, two key business terms come into play: “planting” and “order padding.”
“Fake orders”: After a buyer places an order, the store ships a bottle of mineral water (or an empty package) instead of the actual alcohol. This is a purely fraudulent transaction intended to generate orders to defraud subsidies.
“Brushing”: While these orders are also artificially created, the store may sometimes ship actual alcohol (for inventory clearance or other reasons). Although these orders are technically “brushed,” they involve the shipment of genuine goods, resulting in actual product turnover and costs for the e-commerce platform. This differs in nature from pure “empty package” subsidy fraud.
The audit report lumps these two types of orders together, categorizing them all indiscriminately as fraudulent amounts. This implies that the total may include orders for which actual shipments were made; the subsidies corresponding to these orders were not disbursed by the e-commerce platform based on a complete misunderstanding, raising legal disputes regarding their criminal classification. We spent two weeks conducting the following work:
1. We cross-checked bank transaction records on a transaction-by-transaction basis. We retrieved all bank card transaction details involving Z, as well as the “fake buyers” upstream and downstream of Z, and matched each fund transfer with the corresponding order number in the audit report. This was an extremely tedious process—Z alone was involved in hundreds of orders, requiring repeated cross-checks of transaction times, amounts, and counterparty information.
2. We conducted evidence comparisons with the prosecuting authorities. Attorney Pan Nanyu visited the procuratorate multiple times to request access to the original electronic data, meticulously comparing our compiled spreadsheets with the audit working papers held by the authorities. We discovered that some orders in the audit report could not be corroborated by the bank statements, and in a few instances, orders had been double-counted.
3. Verifying each order with the client. During their meetings, Attorney Pan Nanyu brought a compiled list of orders and asked Z to recall each one: Was this order a “planting vegetables” order or did it involve shipping actual alcohol? Based on instructions from the WeChat group at the time and feedback from the warehouse, she distinguished between the orders she could confirm. She explicitly told me: “‘Planting vegetables’ orders received mineral water bottles, but ‘brushing orders’ sometimes did indeed ship real alcohol. These two are different.”
4. Requesting supplementary cross-examination of the audit report. Attorney Pan Nanyu submitted a written opinion to the procuratorate, pointing out that the audit report failed to distinguish between “planting vegetables” and genuine shipment orders, resulting in an inflated case value, and demanded a reduction.
After two rounds of supplementary investigation, Attorney Pan Nanyu successfully reduced Mr. Z’s case value from the initial investigation’s determination of over 300,000 yuan to just over 200,000 yuan. Although the reduction may seem small, in the sentencing brackets for contract fraud, the difference between 300,000 yuan and 200,000 yuan could directly determine whether the case falls into the aggravated category of “huge amount,” and it also created room for subsequent efforts to secure a finding of accessory liability and probation.
More importantly, this dispute laid the groundwork for subsequent changes to the charges and the application for bail.
III
A Letter to an E-commerce Giant Secures Bail
While submitting the application for a review of the necessity of detention, Attorney Pan Nanyu undertook one of the boldest moves of his career: acting in his capacity as defense counsel, he wrote directly to the founder of a major e-commerce group. The letter read as follows:
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“Mr. XXX, Chairman of the Board of XX Group:
I am Pan Nanyu, a criminal defense attorney at King&Capital Law Firm. I have followed your food delivery revolution with great admiration; it has caused a sensation and is revered by the entire nation. You have made it a point of honor to oppose the exploitation of the working class and to speak out for the common people, your words ringing out loud and clear. I hope you will continue this noble cause; the future of your group is bright, and the possibilities are endless.
Your Group previously launched a “10-billion-yuan subsidy” campaign, passing on benefits to the public—a move universally praised by netizens. However, some unscrupulous merchants engaged in fraudulent practices, such as fabricating orders to claim subsidies—commonly known as “milking the system.” Your Group filed reports nationwide, mobilizing local police to launch investigations. In the blink of an eye, like autumn winds sweeping away fallen leaves, merchants, intermediaries, and order-fakers across the country were rounded up, striking fear into the hearts of all those seeking to exploit the system.
My client is one such “small-time intermediary” (or “scalper”), who remains detained at the XX Detention Center in Beijing, where she has been held for nearly a year. She is in her early twenties, a young woman from a rural village in a remote county of XX. Lacking any means of livelihood, she took on part-time work as a fake order generator to earn a meager income of a few thousand yuan. I admire how you, Sir, achieved your current success with the help of fellow villagers from your hometown in Suqian. The journey has been arduous, and you know the hardships firsthand. Today, however, young people from rural areas often find themselves in the city, lacking both knowledge and legal awareness, making them highly susceptible to straying onto the path of lawbreaking. As we are fellow villagers—our hometowns, XX and XX, are only a few dozen miles apart—I deeply sympathize with the difficulties faced by the younger generation from the countryside.
I have contacted your group’s legal department on several occasions to discuss restitution and settlement, but they have consistently refused, citing the ongoing investigation by the prosecuting authorities. At this juncture, the prosecution has returned the case for further investigation twice, indicating that direct negotiations with your group are now possible—a critical turning point for altering the coercive measures. I implore you to show compassion and grant a green light for the common people at the bottom of this case. With this intention, I am confident you share the same heart.”
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The letter contained no emotional pleas; instead, it stated the facts, highlighted the platform’s responsibility, and requested cooperation regarding the return of ill-gotten gains and settlement. Two weeks later, the procuratorate proactively contacted the defense counsel regarding the return of ill-gotten gains and compensation, and Z’s family returned the proceeds of the crime to the extent of their ability.
Attorney Pan Nanyu cannot quantify to what extent this letter advanced the case. But one thing is certain: criminal defense extends beyond courtroom arguments and written submissions; seeking every possible channel of communication within the institutional framework can sometimes open unexpected windows of opportunity. Soon after, the procuratorate approved the review of the necessity of detention, and Z, who had spent exactly 365 days in the detention center, finally walked out beyond its high walls. Her husband, a burly northern man standing over 1.8 meters tall, wept like a child at that moment.
IV
Courtroom Clash: From Fraud to Contract Fraud,
Two Hearings to Reverse the Charge
From the very beginning of the case, the public security authorities classified it as ordinary fraud. During the review and prosecution stage, the procuratorate also filed charges for fraud. What did this mean? According to judicial interpretations, the benchmark sentence for “fraud involving a huge sum” is far harsher than that for contract fraud. If the classification remained unchanged, even if Ms. Z pleaded guilty and accepted punishment, she would have little chance of receiving a suspended sentence.
Therefore, from the day he accepted the case, Attorney Pan Nanyu made “overturning the classification of fraud and changing it to contract fraud” the central strategy running throughout the defense.
(1) First Court Hearing: Rebutting the Prosecutor on the Record
In July 2025, the first court hearing took place. Twenty-five defendants stood in four rows in the center of the courtroom, while more than a dozen employees of the businesses remained in custody, their visible weariness and exhaustion evident to all.
The prosecutor read the indictment, still insisting on the charge of fraud. When it was Attorney Pan Nanyu’s turn to present his defense, he cut straight to the heart of the matter: “Your Honor, members of the bench, the defense believes the characterization of this case is incorrect. The public security and prosecuting authorities have consistently charged this as fraud, but the essence of this case is contract fraud.”
Attorney Pan Nanyu elaborated point by point:
First, the deceptive acts in this case occurred during the performance of the contract. In 2023, the defendant company signed the “10 Billion Subsidy Campaign Service Agreement” with the e-commerce group, establishing a clear relationship of rights and obligations between the two parties. The so-called “fake orders to defraud subsidies” took place precisely during the performance of this contract. This is not street fraud, nor is it telecommunications fraud; rather, it is contract fraud within the framework of a commercial partnership.
Second, the crime of contract fraud infringes upon dual legal interests—not only the e-commerce group’s property rights but also the fair market trading order of the e-commerce platform. By fabricating false transactions through order padding, the defendant entity deprived other compliant merchants of subsidy opportunities. This disruption of market order cannot be adequately addressed by the general offense of fraud.
Third, when the offenses of fraud and contract fraud overlap, the special law takes precedence over the general law, and the case should be adjudicated as contract fraud. Attorney Pan Nanyu cited a guiding precedent from the People’s Court Case Database in court, pointing out the essence of the ruling: “The key characteristic of the crime of contract fraud is the use of means involving the signing and performance of contracts to defraud others of their property.”
The prosecutor rebutted in court: “The defendant fabricated transactions and sent empty packages, which are typical fraudulent methods unrelated to contracts. Contracts are merely platform rules, not tools for fraud.”
Attorney Pan Nanyu did not back down: “Prosecutor, the e-commerce group’s 10 billion yuan in subsidies were not distributed to merchants out of thin air. They were based on every single order—and an order is the concrete manifestation of a contract. Without the 10 billion yuan subsidy service agreement, there would be no orders; without these orders, there would be no subsidy funds. Every link in this entire scam is embedded within the chain of contract performance. How can you say it has nothing to do with contracts?”
The trial lasted all day, with tensions running high until late into the night. Although the presiding judge did not make a statement on the spot, after the court adjourned, he personally asked Attorney Pan Nanyu for his defense arguments—a sign that the court had, in fact, already accepted Pan Nanyu’s position. By the time they left the courthouse, it was already 9 or 10 p.m. Attorney Pan Nanyu had dinner with his client and the family, sharing the hardships and tears they had experienced over the past year.
After the first hearing, the court formally issued a written opinion to the procuratorate, requesting that the indictment be amended and supplemented.
Consequently, the procuratorate amended the indictment—formally changing the charge from “fraud” to “contract fraud,” while adding three defendant entities as criminal subjects. This demonstrated the procuratorate’s responsible attitude toward the facts and the law, and it also signaled that the core objective of the first phase had been successfully achieved.
(II) Second Court Hearing: Probation Granted
In April 2026, the court held its second hearing. Since the charges had been amended, the expressions of the more than 20 defendants appeared somewhat more relaxed.
The trial proceeded smoothly. Z pleaded guilty and accepted the penalty; the procedures for returning the ill-gotten gains had been fully completed, and the e-commerce platform’s letter of forgiveness was on the bench. The prosecutor recommended a suspended sentence on the spot. During the final statements, Z’s voice trembled, but he tried to speak clearly: “I know I was wrong. I was tempted by small gains, which caused losses to the e-commerce group and brought harm to my own family. I want to go home, live a decent life, and never touch this stuff again.”
The presiding judge closed the case file but did not immediately deliver the verdict. Instead, he paused for a few seconds, then turned his gaze toward the row of young people in the dock and said, “You are all in your twenties—some of you have just graduated, and some are still students. You are so young; don’t let a few thousand yuan ruin your whole life.” These words were deeply comforting. While the judiciary is founded on justice, it should not lack the warmth of human compassion.
As the saying goes, those who handle criminal cases are not merely handling cases, but other people’s lives. Every case represents a life story. What criminal defense attorneys can do is use their expertise to measure the boundaries of justice, and then use compassion to bridge the gap between the law and human sentiment. May every young person who has strayed from the right path be given a helping hand. May every verdict be not just a cold, impersonal sentence, but a true rebirth.
Translated with DeepL.com (free version)
