The troubled Chinese real estate conglomerate Evergrande and its founder, Hui Ka Yan, are facing allegations of inflating revenues by $78 billion (£61.6 billion) in the two years leading up to the company’s default on its debt.
The country’s financial markets regulator has imposed a fine of $583.5 million on Evergrande’s mainland business, Hengda Real Estate.
Additionally, Mr. Hui faces the possibility of a lifetime ban from China’s financial markets.
In January, Evergrande was mandated to undergo liquidation by a Hong Kong court. The China Securities Regulatory Commission (CSRC) primarily attributed the blame to Mr. Hui, formerly China’s wealthiest individual, for allegedly instructing staff to artificially inflate Hengda’s annual results in 2019 and 2020.
According to a filing by the company to the Shenzhen and Shanghai stock exchanges, Mr. Hui was also fined $6.5 million.
Evergrande has not immediately responded to a BBC request for comment. Last September, Mr. Hui, who also serves as the company’s chairman, was placed under police surveillance during an investigation into suspected “illegal crimes.”
This development follows closely after the CSRC’s commitment to intensify efforts against securities fraud and safeguard small investors.
Evergrande has become emblematic of China’s real estate crisis, burdened with over $300 billion in debt.
Liquidators have been tasked with assessing Evergrande’s overall financial standing and exploring potential restructuring options, which may involve asset seizure and sale to settle outstanding debts.
However, the Chinese government may be hesitant to halt work on property developments, given the waiting list of prospective homeowners who have already made payments.
Challenges in China’s property market have significant ramifications, as the sector contributes to approximately one-third of the world’s second-largest economy.
The industry has been facing a major financial squeeze since 2021, when authorities introduced measures to curb the amount big real estate developers could borrow.
Since then several large property firms have defaulted on their debts.
On Monday, official data showed that property investment in China fell 9% in January and February from a year ago.
New construction starts also dropped by 30% which was their their worst fall in more than a year.