China’s Evergrande: Record $78 Billion Financial Fraud Case Unveiled in Regulator’s Investigation
[Current Date], Hong Kong - The China Securities Regulatory Commission (CSRC) announced an unprecedented financial fraud case in China, accusing Evergrande Group and its top executives of inflating revenues by approximately $78 billion.
CSRC’s Discoveries and Penalties
The CSRC announced penalties totaling 4.621 billion yuan ($6.72 billion) against Evergrande’s main Chinese unit, Hengda Real Estate, and its founder and chairman, Xu Jiayin, on [Date].
- Xu Jiayin and Xia Haijun, former vice chairman and CEO of Evergrande, faced identical penalties: a fine of 47 million yuan ($6.5 million) and a lifetime ban from the securities markets.
- Six other Evergrande executives were also fined for their involvement in the fraud.
Details of the Fraud
The investigation, which lasted eight months, uncovered that Hengda had fabricated revenue figures totaling 564.1 billion yuan ($78.2 billion) in 2019 and 2020. The company:
- Inflated sales in financial reports
- Used falsified figures to sell bonds
- Failed to disclose necessary information
Half of Hengda’s reported revenue for 2019 and three-quarters of its revenue for 2020 were found to be false. This resulted in an overstatement of net profit for 2019 by 37.8 billion yuan ($5.44 billion) and net profit for 2020 by 44.4 billion yuan ($6.45 billion).
Prior Setbacks for Evergrande
These penalties follow a series of setbacks for Evergrande:
- In September 2022, debt restructuring negotiations with overseas bondholders were delayed due to regulatory investigations.
- In October 2022, it was revealed that Xu had been detained by Chinese authorities on suspicion of “crimes.”
- In January 2024, a Hong Kong court ordered Evergrande’s liquidation.
Gravity of the Situation
The CSRC described Xu and Xia’s actions as “really bad” and the circumstances as “grave”.
Significance of the Case
This financial fraud case represents the largest ever in China’s securities markets, surpassing previous records according to regulatory statements and media reports.
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