Title: Evergrande Founder and Chairman Accused of $78 Billion Financial Fraud in China’s Biggest Securities Scandal

Chinese Regulators Accuse Evergrande and Xu Jiayin of Inflating Revenues by $78 Billion

In a major development in the Chinese business landscape, Hong Kong-listed real estate giant, Evergrande, and its founder, Xu Jiayin, have been accused of inflating revenues by an astonishing $78 billion by Chinese regulators. This makes it the biggest financial fraud case in China’s securities markets to date.

Regulatory Penalties and Lifetime Ban

The China Securities Regulatory Commission (CSRC) announced penalties totaling 4.62 billion yuan ($682 million) against Evergrande’s main Chinese unit, Hengda Real Estate Group, and its former vice chairman and CEO, Xia Haijun. Both top executives, along with Hengda, have been banned from the securities markets for life.

Xu Jiayin Fined for Overstatements and Other Alleged Violations

A former Forbes China’s richest man, Xu Jiayin, was fined 47 million yuan ($6.5 million) for overstatements and other alleged violations. The CSRC investigation, which lasted eight months, began in late 2022, with Xu initially being a target.

Alleged Sales Fabrication

The regulatory body accused Hengda of reporting fabricated sales of 214 billion yuan ($30 billion) for 2019, nearly half of the year’s revenue. Another 350 billion yuan ($48.6 billion) in sales for 2020, amounting to 78% of Evergrande’s revenue that year, were also falsified.

Significant Impact on Evergrande’s Finances

As a result of these false figures, Hengda’s net profit for 2019 increased by 63%, while 2020’s net profit was boosted by 87%. These numbers represent a considerable portion of Evergrande’s overall profit during that period.

Financial Restructuring Halts

Evergrande’s efforts to restructure its debts with overseas bondholders were suspended during the investigation due to the inability to issue new bonds. Just days after the announcement of the CSRC investigation, Evergrande’s chairman was seized by Chinese authorities on suspicion of “crimes.”

Liquidation of Evergrande

In 2024, a Hong Kong court ruled in favor of liquidating Evergrande.

CSRC Statement and Alleged Crimes

In a statement released Monday, Hengda admitted the accusations and outlined the alleged violations, which included inflating sales in financial reports, using falsified figures to sell bonds, and failing to disclose relevant information as required by law.

The CSRC did not specify which exact crimes Xu and Xia are suspected of committing but mentioned that their “means were really bad, and the circumstances were grave.”

A Staggering Amount of Alleged Fraud

The alleged fraud amounted to a staggering 564.1 billion yuan ($78 billion) over two years, significantly surpassing China’s previously reported largest financial fraud cases in its securities markets.