46 billion yuan case! Why has China's first flexible employment platform illegal business case not yet gone to trial?

A 46 billion yuan case! Why has China's first flexible employment platform illegal business case not yet gone to trial?

The case of Hangzhou Yuancheng Yuedong Information Technology Co., Ltd. has caused a stir in the industry, with the amount involved reaching 46.13 billion yuan, which may cast a legal shadow over the flexible employment industry. The prosecution accuses the platform of not obtaining a payment business license, constituting an illegal business crime, but the family members of the parties involved believe that the platform's business model is a new shared economy encouraged by the state and does not constitute an illegal business.

The case of Hangzhou Yuancheng Yuedong Information Technology Co., Ltd. (hereinafter referred to as "Yuancheng Yuedong") and five others, including Zhang Chao, has not yet gone to trial since the Jiangsu Province Zhenjiang City Dantu District Procuratorate filed a public prosecution with the same-level court in November

1. The case involves an amount of 46.13 billion yuan, causing a stir in the industry.

The original office of Yuancheng Yuedong. Photo by Zhang Mengyun

This case, known as China's first flexible employment platform illegal business case, has been pending for a long time. The case involves a large amount of money and may cast a legal shadow over the entire industry. According to the prosecution, the platform did not obtain a payment business license, which constitutes an illegal business crime. However, the family members of the parties involved believe that the platform's business model is a new shared economy encouraged by the state and does not constitute an illegal business.

The case was originally scheduled to go to trial on June 16 this year, but was postponed due to Zhang Chao and others "reporting nationwide similar illegal crimes". There is no new arrangement for the trial yet.

01

A non-illegal business case triggered by a pyramid scheme

According to public information, Yuancheng Yuedong is registered and operated in Hangzhou, and has developed and operated the "Orange Salary Cloud" flexible employment platform. The core business is to provide compliant services for employment enterprises and flexible employment personnel.

On April 9, 2024, the police called the company's employees and asked them to wait quietly in the office. In the afternoon, Zhang Chao, the actual controller of Yuancheng Yuedong, and other employees were taken away for investigation. Subsequently, Long Mou and Zhong Mouhan, who introduced customers to the platform, also surrendered.

Zhang Chao is the founder of Yuancheng Yuedong. From 2022, he built the "Orange Salary Cloud" flexible employment platform, which had a business scale of tens of billions of yuan in just two years.

On that day, Zhang Chao was criminally detained and later released on bail, but was eventually arrested on November 3, 2025.

The tranquility of Yuancheng Yuedong was broken by a pyramid scheme case hundreds of kilometers away. In early 2024, the Zhenjiang City Dantu District Public Security Bureau investigated a pyramid scheme case called "Treasure Box Plan".

Zhenjiang City Dantu District Public Security Bureau. Photo by Zhang Mengyun

According to relevant materials, Wang Dangzhong and Shi Fengkun developed the "Treasure Box Plan", which attracted members to invest by renting mobile phones to browse videos on the "TIKTOK" platform and earn rewards. The plan formed a 31-level hierarchy and absorbed more than 55.95 million yuan in funds. Wang Dangzhong and others were sentenced for organizing and leading pyramid schemes.

During the investigation of the "Treasure Box Plan" case, the Dantu police found that the bank account of Yuancheng Yuedong's Henan subsidiary had been used to distribute rewards. In January 2024, the account was frozen. In March of the same year, the Dantu Branch Bureau filed a case against Yuancheng Yuedong for suspected illegal business operations.

In November 2025, the Dantu District Procuratorate filed a public prosecution against Zhang Chao and five others, accusing them of suspected illegal business operations.

02

Paid 17 million yuan for bail, suspected of "distant fishing"

The most notable controversy in the case is the issue of jurisdiction, which has led to strong suspicions of "distant fishing" and "interest-driven law enforcement".

According to the materials provided by the parties' family members, the Dantu police investigated Yuancheng Yuedong because they found that the company's subsidiary account had been used to distribute rewards in the pyramid scheme case. However, in fact, the company and Zhang Chao had never paid wages to the members of the pyramid scheme case in Dantu District and had no connection with the case.

"The Dantu Branch Bureau exceeded its jurisdiction and filed a case against Yuancheng Yuedong, suspected of 'distant fishing'." The family members of the parties involved questioned: Yuancheng Yuedong is registered and operated in Hangzhou, and all employees and executives live in Hangzhou. The company has not conducted any business in Zhenjiang and has no local customers in Dantu District, and has not paid any funds to anyone in Dantu District.

According to the materials provided by the parties' family members, after the Dantu police filed the case, they took coercive measures against seven high-level executives and employees of Yuancheng Yuedong and its channel merchants, and required Zhang Chao, Liu Mouhua, and Cao Moufan to sign a plea agreement. The three were required to pay more than 10 million yuan to the public security organs before being released on bail. After preliminary understanding, Yuancheng Yuedong and its subsidiaries, channel partners, and the defendants paid a total of more than 17 million yuan to the Dantu police.

Zhenjiang City Dantu District Procuratorate. Photo by Zhang Mengyun

In 2020, the "Six Prohibitions on Cooperative Investigation and Handling of Cases by Public Security Organs" and the "Seven Prohibitions on Interest-Driven Law Enforcement by Public Security Organs" issued in 2021 clearly prohibited the use of transfer, remittance, or other means to detain suspected property in a disguised form.

Since 2024, the phenomenon of "distant fishing" has attracted high attention from the central government to local governments. The Supreme Procuratorate launched a special supervision on violations of cross-regional law enforcement and interest-driven law enforcement in the national procuratorial organs in March 2025, and set up a special supervision area on the "12309 China Procuratorial Network". In April 2025, the Ministry of Public Security issued the "Regulations on the Jurisdiction of Cross-Provincial Cases Involving Enterprises by Public Security Organs", trying to curb interest-driven law enforcement from the institutional level.

03

Do flexible employment platforms need to obtain a payment license?

In addition to procedural issues such as jurisdiction, the core substantive dispute in this case is whether flexible employment platforms need to obtain a payment business license.

The prosecution's accusation is that the platform is engaged in "public-to-private" fund settlement, which belongs to the payment and settlement business, and has not obtained a payment license, which constitutes an illegal business crime.

"This model is a new shared economy encouraged by the state, solving the industry's pain points of compliant settlement and legal taxation for flexible employment personnel." The family members of the parties involved said that nationwide similar platforms, including many state-owned enterprises and industry-leading enterprises, are key targets for local governments to attract investment. Flexible employment platforms can help flexible employment personnel pay personal income tax in accordance with the law and provide legal invoices to employment enterprises, and are subject to supervision by local governments, banks, and tax authorities.

In 2017, the Supreme Procuratorate stated in the minutes of the symposium on internet financial crimes that the determination of illegal business crimes for payment and settlement should fully consider the social harm of the specific behavior and the necessity of criminal punishment, and strictly grasp the standards for prosecution and non-prosecution.

In 2019, the responsible persons of the Third Criminal Tribunal of the Supreme People's Court and the Legal Policy Research Office of the Supreme Procuratorate said when answering reporters' questions about the judicial interpretation of underground bank criminal cases that "illegal engagement in payment and settlement business" mainly refers to the use of shell companies to assist others in illegally transferring public accounts to private accounts or cashing out.

The business model of the "Orange Salary Cloud" platform. Provided by the interviewee

The family members of the parties involved believe that the flexible employment industry and underground bank criminal cases differ greatly in terms of purpose, funding sources, transaction basis, account use, behavioral characteristics, fund flow, and supervision.

"More than 10,000 similar platforms nationwide, including industry-leading enterprises with a settlement scale of over 100 billion yuan, have not obtained payment licenses, and the government has never required such platforms to obtain payment licenses." The family members of the parties involved said that flexible employment platforms have all completed fund distribution through the bank's corporate online banking system and are under financial supervision, and no platform has been recognized as an illegal business crime for this reason. If this case is convicted, more than 10,000 flexible employment platforms nationwide will face the risk of being recognized as illegal business crimes.

It is worth noting that the judiciary has not previously recognized such platform businesses as illegal business crimes, and some legal professionals call this case "the first case of prosecuting a flexible employment platform for illegal business crimes nationwide".

04

The progress of verifying the report to the court is slow

The family members of the parties involved said that in January 2026, Zhang Chao reported to the Dantu District Court that three companies operating similar businesses and models were suspected of illegal business operations.

On March 17, Zhang Chao's defense lawyer, Liu Xiaofeng, director of Beijing Huaxiang Law Firm, submitted more detailed reporting materials to the Dantu District Court, along with evidence such as communication records between Yuancheng Yuedong employees and employees of the reported companies.

On April 8, another party involved in the case also mailed a report to the Dantu District Court, reporting 24 similar companies suspected of illegal business operations.

The family members of the parties involved believe that the reported companies have the same business type and model as Yuancheng Yuedong, and according to the prosecution's standards, these companies are suspected of illegal business crimes.

"In accordance with the principle of same case, same judgment, whether Zhang Chao's report is true or not is not only related to the sentencing of the two, but also to whether they constitute a crime." On June 10, the family members of the parties involved publicly wrote to the president of the Dantu District Court, Li Pingbo, requesting that the court first verify the report and carefully study the various applications submitted by the defense lawyer, and not rush to trial. If the key facts are not yet clear, the key evidence has not been collected, and the report has not been verified, it is easy to go through the motions of the trial.

Zhenjiang City Dantu District Court. Photo by Zhang Mengyun

The family members of the parties involved said that the defense lawyer's applications submitted to the court include: requesting the court to collect synchronized audio and video recordings of the interrogation, audit reports, and case materials transferred to the Jinan City Public Security Bureau, and to conduct a handwriting appraisal of the signatures on the detention documents. The most critical application is to verify Zhang Chao's report.

"Zhang Chao's report has not been verified, which is directly related to his conviction and sentencing." The family members of the parties involved said that the defense lawyer has repeatedly communicated with the case handler and requested the Dantu District Court to verify the report in accordance with the law, and then arrange a trial after the results come out. However, each time they were informed that the report had been transferred to the public security organs, and then there was no follow-up.

According to the family members of the parties involved, the case was originally scheduled to go to trial on June 16, but the court notified the defense lawyer that in order to safeguard the defendants' right to litigation, it was necessary to investigate and verify Zhang Chao's report, and to further study the various applications submitted by the defense lawyer. Therefore, the trial was postponed, and the time is yet to be determined.

As of August 2026, regarding the report submitted by Zhang Chao to the Dantu District Court, some of the report has not been transferred to the public security organs with jurisdiction over the reported units, and some of the report has not been replied to by the public security organs.

In this regard, the family members of the parties involved, after consulting with lawyers, believe that according to the "Criminal Procedure Law" and the Supreme People's Court's "Opinions on Handling Self-Confession and Meritorious Service", if the defendant provides a specific and clear report to the court during the trial, the court should directly transfer the report to the public security organs with jurisdiction over the reported units for handling. In this case, the Dantu District Court should directly transfer Zhang Chao's report to the public security organs with jurisdiction over the reported units for handling, rather than transferring the report to the Dantu District Procuratorate, and then to the Dantu District Public Security Bureau, and finally to the public security organs with jurisdiction over the reported units.

The family members of the parties involved also said that according to the "Criminal Procedure Law", the court has the right to collect and retrieve evidence from relevant units and individuals. The handling process and results of the reported units by the public security organs with jurisdiction are evidence directly related to Zhang Chao's conviction and sentencing, and they request the Dantu District Court to directly retrieve the evidence from the public security organs with jurisdiction over the reported units to ensure a fair and just trial.

05

The state is concerned about the development of the flexible employment industry

The significance of the Yuancheng Yuedong illegal business case has gone beyond the individual case itself and has become a "sword of Damocles" hanging over the heads of 320 million flexible employment personnel.

A research report recently released by the "China New Employment Form Research Center" jointly initiated by Capital University of Economics and Business and the China Employment Promotion Association shows that the number of flexible employment personnel in China is expected to reach 320 million this year. Calculated based on the total employment population of 725 million at the end of 2025, this means that more than 44% of people are in a state of flexible employment.

Public information shows that the chairman of the board of "Yunzhang" ("Cloud Account"), a leading enterprise in the flexible employment industry, Yang Hui, not only received support from the Supreme People's Court and the Supreme Procuratorate for the project, but also his company has received research from central leaders many times, and Yang Hui was hired as a "special administrative law enforcement supervisor" by the Ministry of Justice on December 26, 2025.

Public information shows that the chairman of the board of "Yunzhang" ("Cloud Account"), a leading enterprise in the flexible employment industry, Yang Hui, not only received support from the Supreme People's Court and the Supreme Procuratorate for the project, but also his company has received research from central leaders many times, and Yang Hui was hired as a "special administrative law enforcement supervisor" by the Ministry of Justice on December 26, 2025.

"Cloud Account" received support from the "two high" courts for the project.

"This is in stark contrast to Yuancheng Yuedong being accused of illegal business crimes: the same business model is encouraged by policies in some places, but is subject to criminal sanctions in other places." The family members of the parties involved pointed out that flexible employment is a form of employment clearly encouraged by the state, and many local governments have introduced policies to support its development. If Yuancheng Yuedong is convicted of illegal business crimes, more than 10,000 similar platforms nationwide will face criminal risks, and the entire industry may fall into panic.

"The deeper impact is that it will directly affect the income settlement channels of 320 million flexible employment personnel, posing a threat to employment stability."

Translation of the Chinese article into English.