Chinese authorities have taken responsibility to end Evergrande saga after the founder Hui Kan Yan was sentenced to life in prison over the massive financial fraud on Thursday.
In recent development, a court in Guangzhou accepted a bankruptcy liquidation case against Evergrande’s mainland Chinese property development unit, which holds the group’s overall debt.
The investigations revealed that Evergrande overstated its revenues by roughly $80 billion across 2019 and 2020 through financial data manipulation.
In the ruling passed by the Shenzhen Intermediate People’s Court, the Chinese court also fined Evergrande Group and Evergrande Real Estate 8.82 billion yuan and 7 billion yuan respectively along with confiscation of his personal assets.
Hui Ka Yan, once called Asia’s richest man, pleaded guilty in April for committing various financial crimes including fraud, corporation bribery, issuing illegal securities, and illegal absorption of public deposits.
Dozens of individuals associated with the group, including Hui’s son, also got prison terms of up to 18 years.
According to industry restructuring experts, the creditors will likely recover a single-digit percentage of Evergrande’s massive liabilities.
Liquidators are seeking $8.4 billion from accounting firm PwC for its auditing role prior to the collapse. Mainland authorities previously fined PwC around $62 million, while Hong Kong authorities reported a separate $166 million in fines and compensation from PwC.
“There are lots of interesting legal questions thrown up by this PRC (the People’s Republic of China) ruling that will take some time to play out,” said Jonathan Leitch, a partner specialized in restructuring at the law firm Hogan Lovells Cadwalader.
