AsianFin — At the end of July, a bombshell report from People’s Daily revealed that approximately $19.5 million in subsidies intended for service providers and operators at a Beijing-based short video platform had been embezzled and laundered through channels including Bitcoin.

The case immediately sparked widespread speculation, with early rumors suggesting that Feng Chao, former Vice President of Kuaishou’s Magnetic Engine, was involved. Feng, who left the company in March, publicly denied the allegations on social media, stating, “I have never had a Bitcoin account, so I have never bought or sold Bitcoin.”

Investigations have since clarified that the key figure behind the scandal is Feng Dian, former General Manager of Kuaishou’s E-commerce Service Provider Operations Center. Feng Dian oversaw the approval of service provider onboarding and the execution of incentive policies and previously represented Kuaishou externally as General Manager of the E-commerce Industry. Sources familiar with the matter say Feng held positions at major companies including Didi and Procter & Gamble prior to his tenure at Kuaishou, and the embezzlement abruptly ended his professional career.

A Closed Loop of Power Breeds Greed: The $19.5 Million Heist

Feng Dian’s embezzlement of 140 million yuan didn’t happen overnight. While not a core executive at Kuaishou, Feng controlled a critical “closed loop” of operations related to subsidy policies designed to attract service providers and operators. The design, implementation, and supervision of these subsidies were largely under his authority, creating opportunities for fraud.

According to People’s Daily, Feng exploited this control by intentionally leaving loopholes during policy formulation and leaking confidential internal operational data to trusted suppliers. These suppliers then submitted fraudulent subsidy applications, redirecting funds meant for legitimate service providers into their own pockets.

Within a year, Feng and his collaborators siphoned off 140 million yuan. To launder the stolen funds, Feng’s team set up shell companies to receive reward payments from Kuaishou, transferring the money through multiple layers until it reached secret accounts controlled by supplier associates. They converted portions of the funds into Bitcoin via eight different overseas cryptocurrency platforms, employing techniques to obscure transaction paths and make tracing difficult. Some laundered funds were later converted back into RMB through encrypted channels and funneled into personal or company accounts.

Eventually, law enforcement caught up. Feng Dian and six accomplices were convicted by the Haidian District People’s Court, receiving prison sentences ranging from three to fourteen and a half years, alongside fines and the surrender of over 90 hidden bitcoins.

Feng’s case is not an isolated incident. Since the start of the year, multiple high-profile tech corruption cases have emerged. On July 24, the Shanghai Public Security Bureau reported that Han Liu, former CEO of Ele.me, along with colleagues, had accepted bribes totaling 40 million yuan over two years, abusing their positions to favor certain suppliers.

Even firms riding the wave of popularity in China’s fintech and AI sectors have not been immune. Former employees of High-Flyer Quant were implicated in a corruption case involving 118 million yuan in illicit gains, with the marketing director Li Cheng personally pocketing over 20 million yuan.

According to the 2020-2024 White Paper on Anti-Commercial Corruption Prosecution Work by the Haidian District People’s Procuratorate, the district — home to Beijing’s dense cluster of internet companies — offers a revealing lens on tech-sector corruption. Over the past five years, prosecutors handled 943 commercial corruption cases involving 1,490 individuals from high-tech and internet companies, accounting for 75.26% of all cases.

Operations roles, particularly in e-commerce and short video platforms, have emerged as hotspots for corruption. Employees responsible for content, user management, event operations, and traffic acquisition can manipulate subsidy approvals, merchant onboarding, and platform rankings for personal gain.

For example, one operations staffer at a short video platform used their authority to provide streamers with expedited account services in exchange for money or gifts, accumulating 3 million yuan illicitly.

Flattened Structures, Decentralized Power, and Grassroots Corruption

Interestingly, corruption isn’t confined to senior executives. Of the 871 criminal suspects reviewed by the Haidian Procuratorate, only 149 were at the director level or above (17.1%), while 722 were managers or lower (82.9%). Flatter organizational structures and decentralized decision-making have empowered mid-level and grassroots employees to exploit loopholes.

The internet industry’s emphasis on young talent also contributes. Among corruption cases, 642 individuals (73.7%) were aged 20-40, and 61.4% held at least a bachelor’s degree. These employees often colluded with external parties, forming interest groups to illegally profit.

Executives, however, exploit financial and structural complexity differently. Han Liu, for instance, converted authority over logistics and supplier approvals into 40 million yuan in bribes over two years, showing how senior management can abuse company resources for personal gain.

China’s tech giants have long emphasized zero tolerance for internal corruption. Tencent founder Pony Ma has publicly criticized loopholes that allow business initiatives to fail due to internal leaks. JD.com founder Richard Liu has similarly warned that even minor embezzlement would be met with intensive investigation.

Recent efforts have intensified due to two key drivers: refined internal management and audit systems, and cost reduction imperatives. As one insider told Caijing Story Club, “Investigations have become much stricter. These leaks and losses are not small sums. Cracking down serves as both a deterrent and a way to recover losses.”

The Haidian District Procuratorate reports that voluntary restitution is common: 560 individuals (64.29% of cases) returned illicit gains or made partial restitution, recovering more than 280 million yuan for companies over five years.

Some companies also make periodic public disclosures, such as Tencent, Douyin, JD.com, and Baidu, to warn employees and reassure partners.

In contrast, Kuaishou opted for a low-key response to the Feng Dian case. The company’s official channels neither confirmed nor commented on the embezzlement, reportedly due to strict internal confidentiality rules.

Industry insiders suggest two reasons for the discretion. First, at the time of the scandal, Kuaishou was at a critical growth stage, with its stock down more than 50% from its peak. Public disclosure could have undermined investor confidence and shaken the capital market. Second, the company was aggressively expanding its e-commerce operations, needing to attract external service providers. A widely publicized corruption scandal could have discouraged participation and cast doubt on the fairness of incentive mechanisms.

Since the incident, Kuaishou is believed to have strengthened its risk control measures and optimized internal oversight, highlighting lessons learned from a high-stakes embezzlement scandal.

The Feng Dian case illustrates a broader tension in China’s internet sector: rapid expansion, immense power concentration, and lagging oversight create fertile ground for corruption. The struggle between human greed and institutional control remains a constant challenge for major tech firms, whether in subsidy allocation, supplier management, or traffic monetization.

As companies continue to expand and decentralize, ensuring robust checks and balances will be key to preventing embezzlement and maintaining trust among investors, partners, and employees. For now, the 140 million yuan scandal serves as both a cautionary tale and a catalyst for tighter governance in China’s fast-growing digital economy.

(Note: 1 USD equals about 7.25 yuan)