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CSRC finesis 8k8 casino legit? Evergrande arm, former chairman for financial fraud

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A view of a residential property project developed by Evergrande Real Estate Group in Nanjing, Jiangsu province. FANG DONGXU/FOR CHINA DAILY

China's top securities regulator said on Friday that it had imposed severe administrative sanctions against Evergrande Real Estate Group, the flagship subsidiary of real estate developer Evergrande Group, for alleged fraudulent bond issuances and violations in information disclosure.

The China Securities Regulatory Commission slapped a fine of 4.175 billion yuan ($576.5 million) on Evergrande, while its former chairman and actual controller Xu Jiayin received the maximum legal penalty of 47 million yuan and has been banned from the securities market for life.

The move signals a heightened commitment from the country's regulators in restoring the confidence of investors and homebuyers in the property market, said legal experts.

They said Xu and other financial executives of the group are expected to face criminal charges under relevant laws and regulations, which may result in prison terms of more than five years due to the severity of the violations.

According to the CSRC, between 2019 and 2020, Evergrande inflated its revenue and profits by prematurely recognizing income, leading to fraudulent bond issuances.

It said the company's annual reports disclosed during this period contained false records.

The penalty imposed on Evergrande's fraudulent bond issuances was calculated at 20 percent of the funds raised according to law, while information disclosure violations were fined at the maximum legitimate amount.

This marks "the strictest enforcement" since 2018, when a unified enforcement system was established for both the interbank bond and exchange bond markets, the commission said.

Evergrande has said that it would continue to fully cooperate with the CSRC and other regulatory bodies, financial media 21jingji reported on Friday. The real estate developer also said it is fully committed to prioritizing key initiatives such as ensuring the delivery of pre-sold housing projects. It said more than 80 percent of these have already been completed across the country.

Dai Guanchun, a senior capital markets lawyer, said it is "almost inevitable" that Xu and the financial executives responsible will also face criminal penalties as the severity of their violations meets the legal standards of criminal prosecution.

"At a time when China has introduced 'nine measures' to better regulate the capital markets, it is crucial to deal with the Evergrande case fairly and properly, (as it has) drawn widespread public attention," Dai said.

The length of the sentence will depend on the specific circumstances, but it is likely that Xu will face a fixed-term imprisonment of more than five years, in accordance with China's Criminal Law.

"Bond issuers, while enjoying the convenience of financing, must also enhance their awareness of the rule of law and investor protection," the CSRC said, adding that it will also hasten investigations into related intermediary agencies.

The commission said it will continue to rigorously combat financial fraud in the securities market, "giving real teeth" to regulation and enforcement.

Liu Chunsheng, an associate professor at the Central University of Finance and Economics, said: "Risks induced by the Evergrande case have spread from the real estate to the capital market, causing huge losses to investors.

"The severe punishment of Evergrande demonstrates the regulator's 'zero-tolerance attitude' toward capital market frauds, as well as its determination to save the housing market."

The move will, together with a series of policies issued previously by the government, help in the recovery of the housing market, Liu added.

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