China Evergrande founder pleads guilty to fraud in epic downfall

HONG KONG – China Evergrande Group’s founder has pleaded guilty to a number of charges, including fund-raising fraud and bribery, in a Chinese court, cementing the downfall of a property tycoon who was emblematic of the country’s real estate boom and bust.

Hui Ka Yan, who rose from humble origins to turn Evergrande into a real estate giant before it collapsed as the world’s most indebted developer, had been accused of a litany of crimes, including illegally absorbing public deposits and fund-raising fraud, according to the official Xinhua news agency on April 14. 

Hui’s swift two-day trial came about three years after he was placed under police control on suspicion of criminal activity. The plea marks a crucial chapter in the aftermath of Evergrande’s collapse, which has left international bond investors and Chinese banks nursing billions of dollars in losses and raised troubling questions about when the real estate market will finally be able to return to health.

Once Asia’s second-richest man, Hui is the latest in a long line of billionaire tycoons to be ensnared by Beijing’s widening crackdown. But his fall was more prominent than most: Evergrande, which had liabilities exceeding US$300 billion (S$382 billion) at its height, has been cited as a key trigger for a prolonged slump in China’s property market, which went into a downward spiral in 2021.

Hui was accused of bribery, embezzlement, unlawfully issuing loans, fraudulent issuance of securities and illegal disclosure of material information. Evergrande was charged with fraudulent issuance of securities.

The company and Hui delivered their final statements, with Hui pleading guilty in court and expressing remorse, the report said.

Hui’s sprawling Evergrande empire stretched from property development to electric vehicles. Rising from humble beginnings, he became one of China’s most iconic rags-to-riches stories during the country’s decades of rapid economic growth.

Also known as Xu Jiayin in Mandarin, Hui was born in Henan province in 1958 and grew up in poverty. Encouraged by the prospect of Deng Xiaoping’s economic reform plan, the son of a wood cutter quit his job at a steel firm in 1992 and later began developing property in Guangzhou, the provincial capital of Guangdong. He then founded Evergrande in 1996, riding the wave of China’s unprecedented real estate boom. 

Evergrande, which means “permanence and greatness” in Chinese, relied on heavy borrowing to fuel its growth, becoming the largest dollar-debt borrower among its peers and, for a time, the country’s biggest developer by sales. During its prime, the firm built more than 1,300 projects across 280 cities. Supercharged by real estate riches, it also expanded its reach into industries ranging from bottled water to professional soccer to electric vehicles.

For a long time, Evergrande skirted liquidity scares by tapping tycoons in China and Hong Kong to buy the firm’s stock and bonds. Hui also turned to his own suppliers and retail investors for financial backing. But Beijing’s crackdown on the property sector since 2020 capped its borrowing capacity, effectively cutting Hui off from credit markets.

Evergrande defaulted on its debt in late 2021. The company was given a winding-up order in Hong Kong in 2024 after failed restructuring attempts, marking a significant escalation in the unravelling of the sector. Later that year, a mainland Chinese court accepted a liquidation application filed against one of its major onshore units. The firm has since delisted. 

In 2024, Chinese regulators accused Evergrande’s main onshore unit of inflating more than 560 billion yuan (S$104 billion) of revenue by recognising sales in advance, an alleged fraud that dwarfs that of Luckin Coffee and Enron. China then suspended the operations of PricewaterhouseCoopers, Evergrande’s long-time auditor, for six months and imposed fines.

China laid much of the blame on Hui, who allegedly instructed other personnel to “falsely inflate” annual results. He was fined 47 million yuan for that and other alleged violations, and banned for life from capital markets activities. Other former executives Xia Haijun and Pan Darong were among people punished with fines and market bans.

Much of Hui’s known wealth is derived from his controlling stake in Evergrande and the cash dividends he has received from the company since its 2009 listing in Hong Kong. Hui has pocketed more than US$7 billion over the past decade, thanks to the firm’s generous payouts, according to Bloomberg calculations. 

Offshore, court-appointed liquidators have escalated steps to recoup some of what creditors are owed. The liquidators have sought to recover US$6 billion in dividends and remuneration paid by the company on the basis that financial statements were allegedly misstated for several years going back to 2017. They have filed lawsuits against Hui, his former wife Ding Yumei, former chief executive Xia and former chief financial officer Pan, among others. 

Hui’s downfall follows a long list of corporate magnates who have faced harsh punishment by the Chinese authorities. Anbang Group Holdings’ former chairman Wu Xiaohui was sentenced to 18 years in prison for fraud and embezzlement in 2018. That same year, China Huarong Asset Management chairman Lai Xiaomin was arrested amid a corruption scandal and executed in 2021 on charges including bribery. HNA Group chairman Chen Feng was detained, and was later sentenced to 12 years in prison. BLOOMBERG