Evergrande Founder Xu Jiayin Banned From China Securities Market Over Fake Reports

A top mainland financial regulator has slapped China Evergrande’s founder and former chairman, Xu Jiayin, with a lifetime ban from the country’s securities market after concluding that the now-bankrupt developer reported two years of bogus results and issued bonds based on the inflated numbers.

Evergrande’s flagship Hengda Real Estate was found to have committed financial fraud by recognising sales in advance, therefore inflating revenue for the years 2019 and 2020 by a combined RMB 564 billion ($78 billion), the company said late Monday in a filing with the Shenzhen Stock Exchange. The overstatement accounted for 50.1 percent of operating income in 2019 and 78.5 percent in 2020.

Evergrande fraudulently issued RMB 20.8 billion worth of bonds in 2020 and 2021 on the strength of the falsified results, according to the China Securities Regulatory Commission. The country’s onetime biggest developer defaulted on its debt in September 2021 and entered liquidation this year after a Hong Kong court issued a winding-up order in January.

The commission imposed RMB 47 million in fines on Xu, who also goes by the Cantonese name Hui Ka Yan and was reported to have been detained by mainland authorities last September on suspicion of “illegal crimes”. Hengda received RMB 4.2 billion in civil penalties.

Former CEO Barred

In addition to the phoney results, the securities watchdog flagged Evergrande for failure to make timely disclosures of financial reports, debt defaults and litigation events.

The regulator laid the blame squarely on Xu and former CEO Xia Haijun, who also received a lifelong ban from the securities market after he “organised and arranged the preparation of false financial reports”.

January’s winding-up order by Hong Kong judge Linda Chan came despite Evergrande having asked for more time to work out a restructuring of the developer’s $329 billion debt pile. The court ruled that Evergrande had no viable plan capable of winning support from a majority of creditors.

Adding to the Shenzhen-based group’s woes are legal actions initiated by property management arm Evergrande Property Services, which is suing its parent to recover RMB 11.4 billion worth of deposit certificate pledge guarantees.

Hong Kong Asset Seizure

Mingtiandi reported earlier this month that a Hong Kong mansion linked to former Evergrande boss Xu had been put up for sale after being seized by receivers.

The receivers appointed Savills to manage a tender for House E at 10 Black’s Link, with market sources estimating the property in Hong Kong Island’s prestigious Peak area to be worth between HK$500 million and HK$550 million ($64 million to $70 million).

House E and neighbouring House C were taken over by receivers appointed by Orix Asia Capital last November, with the two properties said to have a collective value of HK$1.5 billion ($192 million) when Xu pledged the assets to the Japanese financial services firm as collateral for a HK$821 million loan in 2021. The pair of homes is now estimated by market sources to be worth a total of HK$1 billion.

A third property, House B, was seized by China Construction Bank (CCB) Asia in November 2022 and put up for sale in March 2023 at an asking price of HK$880 million. That home, which had been pledged to CCB Asia in 2021 in exchange for a HK$300 million loan, has yet to find a buyer.