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Evergrande Chairman Faces Allegations of Illegal Activities

China Evergrande Group, a beleaguered Chinese property firm, has disclosed that its director and executive chairman, Hui Ka Yan, is under scrutiny for suspected crimes. The company stated that Hui Ka Yan “has been subject to mandatory measures in accordance with the law due to suspicion of illegal crimes.” As a result, the company’s shares will remain suspended until further notice.

A Bloomberg report earlier revealed that Hui Ka Yan had been “placed under police control” and is currently being monitored at a designated location, citing sources familiar with the matter.

In a separate filing, Evergrande disclosed the dire financial situation of its subsidiary, Hengda Real Estate Group. Hengda failed to pay the principal and interest for a 4 billion yuan ($547 million) bond that was due on September 25. Evergrande revealed that as of the end of August, Hengda had a total of 1,946 pending litigation cases involving more than 30 million yuan each, with a total amount of approximately 449.298 billion yuan ($61.61 billion). The total unpaid debts from Hengda amounted to approximately 278.53 billion yuan, with overdue commercial bills of about 206.777 billion yuan.

The situation is further complicated by 163 new enforcement cases against Hengda Real Estate in August, involving a total amount of approximately 9.13 billion yuan. Additionally, 68 cases froze Hengda’s equity interest in subsidiaries and investee companies due to enforcement actions against it.

Evergrande, once China’s largest private sector developer by sales, defaulted in 2021 and had its shares suspended in March of the same year. Trading in its shares only resumed in late August 2023 after a 17-month hiatus.

The company has been grappling with a debt crisis, and its attempts at debt restructuring and negotiations with creditors have faced significant challenges. It recently delayed a debt restructuring meeting with creditors and cited underperformance since its March debt restructuring announcement.

In August, Evergrande, along with affiliate Tianji Holdings and its subsidiary Scenery Journey, applied for Chapter 15 bankruptcy protection in a U.S. court.

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