Evergrande: China property giant and its founder accused of $78bn fraud
The embattled Chinese real estate titan Evergrande, along with its founder Hui Ka Yan, is facing accusations of artificially inflating revenues by $78 billion (£61.6 billion) in the two years leading up to the company’s default on its debt.
China’s financial regulatory authority has imposed a fine of $583.5 million on Evergrande’s mainland subsidiary, Hengda Real Estate. Additionally, Hui faces a potential lifetime ban from China’s financial markets.
In January, a Hong Kong court ordered Evergrande to undergo liquidation.
The China Securities Regulatory Commission (CSRC) attributes much of the responsibility to Hui, once China’s wealthiest individual, alleging that he directed employees to fabricate Hengda’s financial results for 2019 and 2020.
According to filings made by the company to the Shenzhen and Shanghai stock exchanges, Hui has been fined $6.5 million.
Evergrande has yet to respond to requests for comment from the BBC.
Last September, Hui, who also serves as the company’s chairman, came under police scrutiny as part of an investigation into suspected “wrongdoings.”
This development follows recent promises by the CSRC to intensify efforts against securities fraud and safeguard the interests of small investors.
Evergrande, burdened with over $300 billion in debt, epitomizes China’s real estate challenges.
Liquidators have been appointed to assess Evergrande’s overall financial status and explore potential restructuring options.
That could include seizing and selling off assets so that the proceeds can be used to repay outstanding debts.
However, the Chinese government may be reluctant to see work halt on property developments in China, where many would-be homeowners are waiting for homes they have already paid for.
Problems in China’s property market are having a major impact as the sector accounts for around a third of the world’s second-largest economy.
The industry has been facing a major financial squeeze since 2021 when authorities introduced measures to curb the amount big real estate developers could borrow.
Since then several large property firms have defaulted on their debts.
On Monday, official data showed that property investment in China fell 9% in January and February from a year ago.
New construction starts also dropped by 30% which was their their worst fall in more than a year.
