Cheng Lok-lam, 27, is among five people prosecuted by the Independent Commission Against Corruption (ICAC) over the case which took place between 2021 and 2022.
According to the ICAC, Cheng and a fellow defendant handled illicit proceeds of about HK$320,000.
The money came from the family of an inmate who met the main defendant, Sammy Wong, while they were incarcerated in Lai Chi Kok Reception Centre.
Wong had devised a plan to stage two crimes, and relevant information would be sold to fellow inmates so they could report the bogus cases to police in exchange for sentence reductions.
Two inmates eventually paid Wong HK$1.5 million through their family members.
Wong and three other defendants have since pleaded guilty, and received jail terms ranging from one to three years and six weeks.
Cheng originally denied her involvement, with her trial scheduled to begin at the District Court on Monday.
But she changed her mind and entered a guilty plea on Tuesday. Deputy District Judge Li Chi-ho adjourned Cheng’s case until Wednesday for mitigation and extended her bail.