"Prop Factory" Behind Billions in Fake Transactions — Exposing the Case of a Criminal Gang Led by Liu Yang and Gong Dawei Faking VAT Invoices

Recently, the Tax Inspection Bureau of the Liangshan Yi Autonomous Prefecture Taxation Bureau of the State Taxation Administration, based on lead information pushed by relevant departments, in conjunction with public security authorities, has lawfully investigated and cracked down on a criminal gang led by Liu Yang and Gong Dawei for the crime of issuing VAT invoices for fictitious transactions.

After investigation, from 2023 to 2024, the criminal gang led by Liu Yang and Gong Dawei registered and established three enterprises in Butuo County—Jinyuan Wood Industry Co., Ltd., Longyi Wood Industry Co., Ltd., and Chanteng Wood Industry Co., Ltd.—and, without real transactions, falsely issued agricultural product purchase invoices to themselves in order to offset input VAT, and falsely issued VAT special invoices to others.

In July 2025, the Tax Inspection Bureau of the Liangshan Yi Autonomous Prefecture Taxation Bureau of the State Taxation Administration, pursuant to relevant laws and regulations, determined that 320 VAT special invoices issued to the three enterprises, including Jinyuan Wood Industry Co., Ltd. of Butuo County, and 213 agricultural product purchase invoices obtained by them were fictitious.

In November 2025, the principal offenders Liu Yang and Gong Dawei, for the crime of issuing VAT special invoices, were both sentenced to fixed-term imprisonment of ten years and fined. The other seven accomplices were each sentenced to criminal detention from three months to fixed-term imprisonment of three years and six months, respectively, and fined. Meanwhile, the tax authorities have, according to law, conducted investigation and verification or filed cases for inspection of 120 downstream invoice-accepting enterprises, and recovered and remitted 5.8 million yuan in taxes.

“Mountain factories” could process board material worth over a hundred million?

In the earlier stage, the Tax Inspection Bureau of the Liangshan Yi Autonomous Prefecture Taxation Bureau of the State Taxation Administration received lead information jointly pushed by higher-level tax authorities and public security authorities, indicating that three enterprises, including Jinyuan Wood Industry Co., Ltd. of Butuo County, had major suspicions of fictitious invoice issuance.

Using tax big data, tax personnel analyzed and found that the three enterprises had similar founding dates, identical registered addresses, close kinship or hometown relationships among their legal representatives, and highly overlapping ownership structures. Even more suspicious was that, from 2023 to 2024, the market price for crude timber in Liangshan Prefecture was 260 to 340 yuan per cubic meter, while the crude timber purchase prices of the three companies were 840 to 930 yuan per cubic meter—generally more than double the market average. Moreover, the purchase amounts for individual natural persons were often several million yuan, far exceeding the normal operating capability of local farmers.

To further verify the situation, the inspection team went to the locations of the three enterprises for on-site verification and found that the enterprises were located in Butuo County, which is a high-cold mountainous area. Forest resources account for only 8.04% of the county’s total area, and vegetation resources are relatively scarce. In addition, Butuo County has no expressways and there are many rugged and narrow road sections. In winter, the road surface remains frozen for a long time, making it difficult to transport large quantities of goods externally. With double restrictions from the ecological environment and transportation conditions, timber logging and sales could not possibly support the billion-level crude timber transactions reflected in the invoice information submitted by the three enterprises. As for the so-called “processing factory,” although it has some equipment, it does not have critical production equipment such as the hot press needed to process board materials. By retrieving electricity company data, it was found that from 2023 to 2024, the factory generated electricity costs of 130,000 yuan in total, which is far from the energy consumption required for its large-scale sales of board material, clearly contradicting basic production logic.

Based on these doubts, tax personnel initially determined that the three enterprises were suspected of falsely issuing agricultural product invoices. Given the case’s major scope and complexity, the Tax Inspection Bureau of Liangshan Yi Autonomous Prefecture Taxation Bureau immediately formed a special task force together with local public security and other departments to comprehensively investigate and handle the case.

Faked “from-production-to-sales” chains: all logistics and labor were fake

When the special task force further sorted the invoice information, it found that the agricultural product purchase invoices issued by the three enterprises to themselves were all issued in the name of “purchasing crude timber from natural persons.” Among the 58 villagers involved, 51 were local Yi villagers in Butuo County. Through questioning and visits, it was found that most of these 51 Yi villagers do not know Chinese characters and cannot speak Chinese. These villagers had never sold any crude timber and had never received any payments, yet they were, muddle-headedly, turned into “suppliers.” The “operator” behind it was Liu Yang, the former legal representative of Jinyuan Wood Industry Co., Ltd. of Butuo County, and Gong Dawei, the legal representative of Longyi Wood Industry Co., Ltd. of Butuo County.

Faced with the information on the upstream suppliers that did not reflect reality, the special task force, in accordance with the law, obtained the bank transaction records of downstream invoice-accepting enterprises. It found that after downstream enterprises remitted the “purchase payments” into the public accounts of the companies involved, the funds were typically split and transferred into 5 to 8 individual accounts within two hours. After the fictitious-issuing gang deducted “service fees,” the remaining funds were routed through 6 to 8 layers of individual accounts, and ultimately flowed back to the actual controllers of the downstream enterprises or their related parties’ accounts—forming a covert but complete closed loop of fund returns.

To further ascertain the truth, the special task force conducted assistance checks on downstream enterprises with larger amounts of invoice acceptance, and found that the input material warehouse receipts, finished goods outbound records, transportation contracts, or freight records provided by this gang were all forged. Further confirmation was obtained during interviews of the illegal fact that Liu Yang and Gong Dawei contacted downstream enterprises to issue fictitious invoices. Through field investigations, it was found that on the companies’ payroll roster, the 40-plus “employed” workers listed were mostly recruited on a short-term temporary basis, used only to respond to inspection and photo-taking. The factory’s equipment was basically secondhand, not fully in operation, and lacked core production equipment.

The wooden-industry fictitious invoice scheme was exposed and ultimately led to legal sanctions

By this point, under the special task force’s all-around thorough investigation, three enterprises in Butuo County, Liangshan, were fully exposed as “props factories”: the criminal gang led by Liu Yang and Gong Dawei, by setting up three wood industry companies, under the guise of labor, illegally collected villagers’ identity information to issue crude timber purchase invoices for themselves; at the same time, by purchasing secondhand equipment, temporarily hiring personnel, and other means, they fabricated the appearance of production to issue VAT special invoices for board material categories for others.

Confronted with the conclusive evidence held by the special task force, Liu Yang, Gong Dawei, and others admitted their criminal facts without reservation. They acknowledged that by registering and establishing wood industry companies, and in the absence of real transactions, they illegally collected villagers’ identity information to issue 213 agricultural product purchase invoices to themselves, involving an amount of 110 million yuan; and in the absence of real transactions, by charging service fees, they issued 320 VAT special invoices to others, involving an amount of over 99 million yuan.

Article 21, Paragraph 2 of the “Measures for the Administration of Invoices of the People’s Republic of China” provides that no unit or individual may engage in any of the following acts of fictitious invoice issuance: (1) issuing invoices to others or to oneself that do not match the actual business circumstances; (2) letting others issue invoices to oneself that do not match the actual business circumstances; (3) introducing others to issue invoices that do not match the actual business circumstances.

In light of their illegal acts, in July 2025, the Tax Inspection Bureau of the Liangshan Yi Autonomous Prefecture Taxation Bureau of the State Taxation Administration, pursuant to law, determined that 320 VAT special invoices issued by three enterprises, including Jinyuan Wood Industry Co., Ltd. of Butuo County, and the 213 agricultural product purchase invoices obtained by them were fictitious. In November 2025, the principal offenders Liu Yang and Gong Dawei, for the crime of issuing VAT special invoices, were each sentenced to ten years of fixed-term imprisonment and fined. The other seven accomplices were each sentenced to criminal detention from three months to fixed-term imprisonment of three years and six months, respectively, and fined. Meanwhile, the tax authorities have, according to law, conducted investigation and verification or filed cases for inspection of 120 downstream invoice-accepting enterprises, recovered and remitted 5.8 million yuan in taxes.

Massive information and precise interpretation—only on the Sina Finance app