China Evergrande accused of inflating revenue by $78B

China Evergrande Group, the embattled developer at the center of China’s real estate turmoil, allegedly falsified revenue by over $78 billion in the two years leading up to its collapse, as per the nation’s top securities regulator.

According to a filing on Monday citing the China Securities Regulatory Commission (CSRC), Evergrande's main onshore unit Hengda Real Estate Group purportedly inflated its 2019 income by approximately 214 billion yuan ($29.7 billion) and another 350 billion yuan in the 2020 annual results by recognizing sales prematurely.

Asia's richest tycoon fined $6.5M, lifetime ban imposed

The CSRC attributed much of the responsibility to Hui Ka Yan, the founder and former chairman, accusing him of instructing personnel to "falsely inflate" Hengda’s annual results for those two years.

The regulator labeled Hui's actions as "egregious," particularly as he was the supervisor in charge. Hengda was also accused of issuing 20.8 billion yuan in bonds fraudulently, using these inflated figures for marketing purposes.

In response to the allegations, the CSRC imposed fines and market bans on several executives, including Hui Ka Yan, former CEO Xia Haijun, and CFO Pan Darong.

Hui was fined 47 million yuan and permanently banned from capital markets activities. Hengda itself faced a fine of 4.18 billion yuan.

This development marks a significant setback for Hui, once counted among Asia’s wealthiest tycoons, overseeing a vast empire spanning real estate to electric vehicles.

Evergrande, one of China’s largest developers, accumulated substantial debt to fuel its nationwide expansion amid booming condo sales. However, the company's fortunes began to falter after regulatory crackdowns on borrowing, coupled with an economic slowdown and pandemic-related sales disruptions.

The CSRC alleges that the inflated figures accounted for half of Hengda’s total revenue in 2019 and 79% in 2020, exaggerating profits by 63% and 87% respectively during those years.

Additionally, Hui is accused of delaying the publication of Hengda’s earnings reports, failing to disclose lawsuits, and defaulting on debt payments, according to the CSRC.

Source: Newsroom