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Zebra Consumption Yangzhe

No matter what the outcome is, the money that needs to be recovered must not be let go.

On the evening of August 5, China Evergrande disclosed an announcement that the liquidator had filed a lawsuit in the Hong Kong High Court in the name of the company, seeking to recover dividends and remuneration paid to them from December 31, 2017 to December 31, 2020 due to the company's financial misreporting, totaling approximately US$6 billion.

The above-mentioned defendants have either been subject to compulsory measures or their whereabouts are unknown, and their assets are difficult to clarify. There is uncertainty as to whether the claim will be successful and how much money can be recovered in the end.

$6 billion to recover

After being secretly promoted for nearly five months, a major event that happened to China Evergrande (03333.HK) was finally released from the confidentiality order and became public.

On March 22 this year, the liquidator, in the name of the company, initiated legal proceedings against Xu Jiayin, the company's former CEO Xia Haijun, and former chief financial officer Pan Dayong in the High Court of the Hong Kong Special Administrative Region.

The lawsuit later gradually developed to include Xu Jiayin's spouse or former spouse Ding Yumei, and three entities related to Xu and Ding.

Through the lawsuit, the company seeks to recover approximately $6 billion from seven defendants, representing dividends and remuneration paid to the defendants between December 31, 2017 and December 31, 2020, due to financial misstatements.

Previously, China Evergrande has been granted multiple injunctions restricting Xu, Ding and Xia from disposing, selling or reducing the value of their global assets to a limit not exceeding the relevant prescribed limit. This move is intended to prevent the defendants from transferring assets during the litigation.

The writs and injunctions related to the above-mentioned proceedings are subject to a confidentiality order issued by the Hong Kong High Court until August 2, when the confidentiality order is lifted.

According to the investigation by the China Securities Regulatory Commission, in 2019 and 2020 alone, Evergrande Real Estate Group (the domestic entity of China Evergrande) inflated its revenue by RMB 213.989 billion and RMB 350.157 billion, respectively, accounting for 50.14% and 78.54% of the total revenue in each period; and inflated its profits by RMB 40.722 billion and RMB 51.289 billion, accounting for 63.31% and 86.88% of the total profits in each period.

These two years are the critical period for the company to fulfill its performance commitments after the third round of strategic investment, and it needs to achieve net profits of no less than 55 billion yuan and 60 billion yuan respectively.

Despite having a debt of up to 2 trillion yuan, the company still paid high salaries and dividends to its executives based on false financial data.

According to statistics, since its listing in 2009, China Evergrande has distributed dividends totaling more than 73.3 billion yuan. Xu Jiayin and his wife have long controlled 70% of the company's shares and have taken away a total of more than 50 billion yuan.

Currently, relevant litigation is in progress, and there is uncertainty as to whether the claim will be successful and how much amount can be ultimately recovered.

Where are Xu Jiayin and others?

In the announcement disclosed by China Evergrande on the evening of August 5, many people paid attention to a detail: the relationship between Xu Jiayin and Ding Yumei was described as "spouse or former spouse" in the announcement, and the relationship between the two seemed to have become an unsolved case.

In August last year, in an equity transaction case of Evergrande Auto, Ding Yumei, the spouse of Xu Jiayin, suddenly became a "third party independent of the company and its affiliates."

At that time, it was widely speculated that before the Evergrande incident, the two had adopted a "technical divorce" in order to divide their finances and avoid debt.

In February this year, Ding Yumei, who had not been seen for a long time, suddenly sued her second son Xu Tenghe in Hong Kong, seeking to recover the equivalent of about HK$1 billion. The reason was that the defendant failed to repay the principal and interest on time as agreed in the loan agreement signed by the two parties in June 2020.

This move made the relationships among the Xu family even more confusing.

In September last year, Xu Jiayin was taken into custody for suspected crimes, and Xu Tenghe was subsequently taken away for investigation. The whereabouts of Ding Yumei and her eldest son Xu Zhijian remain a mystery.

How many assets does Xu Jiayin have? Where are they distributed? Under whose name? It is difficult to tell. In May this year, Xu Jiayin was fined 47 million yuan by the China Securities Regulatory Commission for his major responsibility in the fraudulent issuance of bonds by Evergrande Real Estate and illegal information disclosure, and was banned from the securities market for life.

Xia Haijun joined Evergrande in 2007 and later served as director and CEO of China Evergrande. He is Xu Jiayin's right-hand man.

As the second-in-command of the former largest real estate developer, Xia Haijun received huge returns from Evergrande. From 2008 to 2020, he received more than 1.6 billion yuan in salary and equity incentives from China Evergrande.

When Evergrande was already in a major crisis, Xia sold off his holdings in Evergrande Property and Evergrande Auto in August 2021, cashing in a total of over 100 million Hong Kong dollars.

In July 2022, Xia Haijun resigned from his positions as executive director and chief executive officer of China Evergrande and his whereabouts are unknown. In May this year, the Shenzhen Stock Exchange issued a disciplinary decision to him, but because it was unable to contact him, it could only take the measure of public announcement.

A few months ago, there were reports that Xu Jiayin and Xia Haijun’s luxury homes in Hong Kong had been taken over or sold at a discount.

Pan Darong is also a person that Xu Jiayin relies on very much. Pan joined Evergrande in 2006 and served as executive director and chief financial officer of China Evergrande from August 2016 to July 2022.

In the case of China Evergrande's financial fraud, Pan Darong organized and coordinated the fraud, and his behavior was bad and the circumstances were serious. In May this year, he was fined 9 million yuan by the China Securities Regulatory Commission and banned from the securities market for 10 years.

Evergrande is not Evergrande

After more than 20 years, the Evergrande Empire that Xu Jiayin built with leverage and lies collapsed overnight.

In July 2023, the belated financial reports for 2021 and 2022 were disclosed, allowing the outside world to see the real China Evergrande.

As of the end of 2022, the company's total liabilities reached 2.44 trillion yuan and its net assets were -599.1 billion yuan; the total net loss from 2021 to 2022 exceeded 800 billion yuan.

According to relevant announcements from China Evergrande, as of November 2023, Evergrande Real Estate has 2,053 pending lawsuits with a subject amount of more than 30 million yuan, with a cumulative subject amount of more than 490 billion yuan. During the same period, the accumulated outstanding debts exceeded 310 billion yuan, and the accumulated overdue commercial bills exceeded 200 billion yuan.

On the morning of January 29 this year, the Hong Kong High Court held a liquidation hearing for China Evergrande. In the end, the judge ruled on the spot that the company should be liquidated. At the same time, the company's stock trading was suspended and continued to be suspended.

As the joint and several liquidators are currently ascertaining the company's current state of affairs, the company's 2023 financial report, performance and annual report have not been disclosed.

Since February this year, China Evergrande has received several resumption of trading guidelines issued by the Hong Kong Stock Exchange, with increasingly stringent requirements. If the company's situation changes, the guidelines will be revised or supplemented.

Before the suspension, China Evergrande's share price was HK$0.163 per share, with a total market value of HK$2.152 billion.