Chinese tycoon accused of largest fraud in history

It’s been a “spectacular fall from grace” for Evergrande, the property giant at the heart of China’s ongoing property crisis, says Lionel

Lim in Fortune.

Founded in 1996, Evergrande grew as China’s economy boomed and more Chinese turned to real estate as an investment. Yet as the group acquired more and more property, including a football club in the Chinese Super League, it also acquired a staggering debt pile of $300bn.

The business defaulted in 2021 and was ordered to liquidate by a Hong Kong court in January of this year, leaving creditors with pennies on $20bn of offshore bonds. Beijing’s latest indictment is that both Evergrande and its founder Hui Ka Yan (pictured) fraudulently inflated revenues by almost $80bn. The Chinese regulator will impose a $583m fine on Hengda Real Estate Group, Evergrande’s main onshore unit, and a $6.53m fine on Hui, who is accused of being mostly to blame for the fraud and will be banned for life from the securities market. If Beijing’s accusations are accurate, Evergrande will be guilty of one of the largest frauds in history, dwarfing those of Enron and Worldcom.

Hui, 64, rose from a “humble upbringing” to become one of Asia’s richest business tycoons, says the BBC.

He was born into a poor rural family in 1958, and his early childhood was shaped by Mao’s disastrous Great Leap Forward campaign. After graduating from university, Hui spent a decade working as a steel technician before becoming a salesman for a property developer in Guangzhou.

It was there that he founded Evergrande in 1996, and rapidly expanded it with huge amounts of debt. His fortune was estimated at $42.5bn when he topped Forbes’ list of Asia’s wealthiest people in 2017.

Many now believe that Hui could follow other tycoons who have fallen foul of Beijing and face a long stretch in jail, says the Financial Times. His fall marks the “end of an era”, says Desmond Shum, author of a book about Chinese business and politics, who knew Hui in his heyday. Hui took the risks he did because in the past few decades the economy was considered to be on an unstoppable upward trend, he says. When the downturn came, people were “completely unprepared for it” – or for President Xi’s crackdown.