A court in Shenzhen, China, sentenced Evergrande Group founder Hui Ka Yan to life in prison on Thursday. The court also imposed fines totaling $2.3 billion on the real estate development companies. The sentencing follows the collapse of the developer, which had accumulated more than $300 billion in liabilities.
The Shenzhen Intermediate People's Court convicted Hui and Evergrande of large-scale financial fraud involving the inflation of assets and the concealment of liabilities. The court stated that Hui, who is also known as Xu Jiayin, abused his position to orchestrate the fraud and misappropriate company assets. The legal proceedings began after Chinese authorities initiated a crackdown on excessive borrowing in the real estate sector in 2020.
According to the court's statement, Evergrande Group was fined 8.82 billion yuan ($1.31 billion) and Evergrande Real Estate Group was fined 7 billion yuan ($1.04 billion). Several other senior executives received prison sentences of up to 18 years on charges including fraud and the illegal collection of public deposits. Hui had previously pleaded guilty in April to charges of bribery, fraud, and illegal absorption of public deposits.
For ordinary citizens and investors, the impact was felt through a downturn in the property market that has weighed on the broader Chinese economy since the 2020 regulatory crackdown. Apartment buyers would have noticed the effects of the company’s reported tactics, which included booking revenue before the completion and delivery of units. The company's 2021 debt default and subsequent liquidation order have served as a central point in the ongoing regional economic crunch that followed the end of the industry's era of high borrowing.
The case sets a legal precedent for how Chinese authorities handle large-scale corporate insolvency and financial data manipulation. The investigation revealed that Evergrande manipulated financial data by prematurely booking revenue, totaling roughly $80 billion in overstated income. With the founder now sentenced to life and the company ordered to liquidate, the next steps involve the continued execution of the liquidation process and the administration of the multi-billion dollar fines. Further court dates for the other executives were not reported.