China Evergrande founder accused of exaggerating his revenue by $78 billion

Evergrande China Group exaggerated its income by more than $78 billion and committed securities fraud for two years before its spectacular collapse in 2021, a top Chinese regulator said.

The China Securities Regulatory Commission has accused Hui Ka Yan, the founder of Evergrande, of “making decisions and organizing fraud,” the company reported in a filing late Monday with the Shanghai and Shanghai stock exchanges. Shenzhen.

Mr. Hui was fined $6.5 million and banned for life from Chinese financial markets. Xia Haijun, former chief executive officer, was fined $2 million and was also banned from financial markets, along with several other executives. The company's main land unit, Hengda, was fined $580 million.

The New York Times reported in December this questionable accounting and poor oversight led to Evergrande's demise. In the years before it defaulted on its debt, Evergrande had treated the money it received for apartments as income, even though sometimes it did not build those apartments, the Times reported.

In the company's filing, Hengda placed the blame solely on Mr. Hui. As chairman of Evergrande, Mr. Hui was in charge of all of the company's real estate operations and “directed other personnel to falsely increase performance,” the company wrote.

He did it, the text adds, “with particularly bad means and in particularly serious circumstances”.

Regulators found that Hengda inflated its revenue by nearly $30 billion in 2019 and $48.6 billion in 2020. It then raised funds on financial markets based on falsified figures.

This development is another blow to Evergrande's already shattered reputation. Once an emblem of China's entrepreneurial success and ambition, Evergrande is now a name that draws the ire of landlords across China.

Evergrande has become the most visible example of China's real estate crisis. Its failure, with a debt of less than $300 billion, heralded the largest wave of defaults in modern history. China's top leaders are now trying to move the $18 trillion economy away from construction, a sector that once contributed a third of the country's growth and employed many of its workers.

After defaulting, Evergrande tried to work with private lenders and international investors who had loaned it tens of billions of dollars abroad. Last summer, the company announced that it had moved toward a restructuring agreement.

Then, in September, Mr. Hui was arrested by the authorities and all restructuring negotiations ended.

Hong Kong Court order Evergrande will be liquidated in January.

Zixu Wang contributed reporting from Hong Kong.

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