Evergrande: Chinese property giant and its founder accused of $78 billion fraud

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By journalsofus.com

  • By Mariko Oei
  • business reporter

image Source, getty images

image Caption,

Hui Ka Yan is the founder of Chinese property giant Evergrande

Struggling Chinese property giant Evergrande and its founder Hui Ka Yan have been accused of inflating revenue by $78bn (£61.6bn) over two years before the company defaulted on debt repayments.

The country’s financial market regulator has imposed a $583.5 million fine on the company’s core business, Hengda Real Estate.

Mr Hui also faces a lifetime ban from China’s financial markets.

The China Securities Regulatory Commission (CSRC) placed much of the blame on Mr Hui, once China’s richest man, after he allegedly instructed employees to “falsely inflate” Hengda’s annual results in 2019 and 2020 .

Evergrande did not immediately respond to the BBC’s request for comment.

The announcement comes days after the CSRC vowed to crack down on securities fraud and protect small investors “tooth and horn”.

Evergrande has been the poster child of China’s real estate crisis, with more than $300 billion in debt.

Liquidators have been appointed to look at Evergrande’s overall financial position and identify possible restructuring strategies.

This may involve seizing and selling assets, so that the proceeds can be used to repay outstanding debts.

However, the Chinese government may be reluctant to let work on property development in China come to a halt, where many prospective homeowners are waiting for homes they have already paid for.

The problems in China’s property market are having a major impact as the region accounts for about a third of the world’s second-largest economy.

The industry has been facing a major financial crunch since 2021, when authorities introduced measures to curb the amount of borrowing by large real estate developers.

Since then many large property companies have defaulted on their loans.

On Monday, official data showed that property investment in China fell 9% in January and February from a year earlier.

New construction jobs also fell 30%, their worst decline in more than a year.

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