Chinese regulators have accused Evergrande and its founder, Xu Jiayin, of inflating revenues by $78 billion, leading to the biggest financial fraud case in the country. The China Securities Regulatory Commission (CSRC) imposed a penalty of 4.175 billion yuan ($580 million) on Hengda Real Estate, the main Chinese unit of Evergrande. Xu Jiayin was fined 47 million yuan ($6.5 million) and banned from the securities markets for life due to the overstatement and other alleged violations.
An eight-month-long investigation by the CSRC revealed that Evergrande had fabricated 214 billion yuan ($30 billion) in sales for 2019 and 350 billion yuan ($48.6 billion) in sales for 2020. These falsified figures inflated the company’s net profit by 63% in 2019 and 87% in 2020. The total amount of the alleged fraud over two years amounts to 564.1 billion yuan ($78 billion), making it the largest financial fraud case in mainland China’s securities markets.
In addition to the penalties on Hengda and Xu Jiayin, the CSRC fined six other executives for being “directly responsible” in the fraud scheme. Former vice chairman and CEO of Evergrande Group, Xia Haijun, was also banned from China’s securities markets for life. The regulator stated that Xu Jiayin had made decisions to carry out the financial fraud, while Xia Haijun had organized and prepared the falsified financial reports, resulting in severe consequences for the company.