China Evergrande Founder Accused of Exaggerating Revenue by $78 Billion

China Evergrande Group exaggerated its revenue by more than $78 billion and committed securities fraud over two years before its spectacular collapse in 2021, a top Chinese regulator said.

The China Securities Regulatory Commission accused Hui Ka Yan, the founder of Evergrande, of “making decisions and organizing fraud,” the company reported in a filing to the Shanghai and Shenzhen stock exchanges on Monday night.

Mr. Hui was fined $6.5 million and banned from China’s financial markets for life. Xia Haijun, a former chief executive, was fined $2 million and also banned from financial markets, along with several other executives. The company’s main onshore unit, Hengda, was fined $580 million.

The New York Times reported in December that questionable accounting and poor oversight led to Evergrande’s demise. Over the years before it defaulted on its debt, Evergrande had been treating money it received for apartments as revenue even though at times it had not built those apartments, the Times reported.

In the company filing, Hengda laid blame solely on Mr. Hui. As chairman of Evergrande, Mr. Hui was in charge of all the company’s real estate business and “instructed other personnel to falsely increase the performance,” the company wrote.

He did so, it added, “with exceptionally bad means and exceptionally serious circumstances.”

Regulators found that Hengda inflated its revenue by nearly $30 billion in 2019 and by $48.6 billion in 2020. Then it raised money in financial markets based on the falsified numbers.

The development is yet another blow to Evergrande’s already shattered reputation. Once an emblem of China’s entrepreneurial success and ambition, Evergrande is now a name that angers homeowners across China.

Evergrande has become the most visible example of China’s real estate crisis. Its failure, under $300 billion of debt, heralded the largest wave of property defaults in modern history. China’s top leaders are now trying to wean the $18 trillion economy off construction, a sector that once contributed to a third of the country’s growth and employed much of its workers.

After it defaulted, Evergrande tried to work with private lenders and international investors who had lent it tens of billions of dollars overseas. Last summer, the company reported that it had made progress toward a restructuring deal.

Then, in September, Mr. Hui was detained by authorities and all restructuring talks came to an end.

Hong Kong court ordered Evergrande to be liquidated in January.

Zixu Wang contributed reporting from Hong Kong.