The founder of China Evergrande Group, a company known as the world's most heavily indebted property developer, has entered a guilty plea for offences including fraudulent use of funds, fundraising fraud, and the illegal acceptance of public deposits. This admission occurred during court proceedings in Shenzhen, a city in southern China.
Evergrande has been in default on the majority of its over $300 billion in debts since 2021. The company's financial difficulties are seen as emblematic of broader issues within China's property sector, which have had a sustained impact on economic growth.
Hui Ka Yan, the company's founder, "pleaded guilty and expressed remorse" during trials held on Monday and Tuesday concerning him and Evergrande, according to a statement posted by the court on its official WeChat account.
Representatives for the liquidators of Evergrande declined to offer comments regarding the ongoing legal case.
Attempts to reach Hui, aged 67, for comment were unsuccessful. He has not been publicly seen since being taken into custody by Chinese authorities in 2023, following Evergrande's default.
The Shenzhen Municipal Intermediate People's Court also stated that Hui and the company face accusations related to illegally extending loans, fraudulent securities issuance, and bribery involving various units. While verdicts are anticipated, the court has not yet scheduled a specific date for their announcement.
The company's inability to settle billions of dollars in wealth management products caused considerable distress among ordinary citizens, many of whom saw their investments evaporate. These failures also led to public protests and raised concerns about social stability.
The maximum penalty for illegal fundraising is life imprisonment and property confiscation, while bribery can also result in a life sentence.
In 2024, China’s securities regulator imposed a fine of $6.6 million on Hui, who was once among China’s wealthiest individuals, and banned him from the securities market permanently. This action followed findings that Evergrande's main subsidiary had overstated earnings and engaged in securities fraud.
Hui, who began his career as a steel technician, was raised by his grandmother in a rural village in central Henan province. He amassed his fortune by focusing on affordable housing.
After establishing Evergrande in 1996, Hui transformed it into China's largest property developer based on contracted sales, pursuing an aggressive debt- fueled expansion strategy.
He also ventured into diverse business areas, including electric vehicles and football, both of which have been areas of personal interest for President Xi Jinping.
According to Forbes, Hui was the wealthiest man in Asia in 2017, with a net worth estimated at $45.3 billion. By 2023, his net worth had reportedly fallen to approximately $3 billion.
In 2024, Evergrande was issued a liquidation order by a Hong Kong court and was removed from the Hong Kong stock exchange last year, marking the conclusion of a turbulent period of boom and bust.
Beyond mainland China, Evergrande's liquidators have been involved in legal battles to freeze offshore assets belonging to the founder and his former spouse. This effort aims to recover approximately $6 billion in dividends and remuneration that were paid out to Hui and other former executives.
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