Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

China Everground was founded in 1996 and went public in 2009 on the Hong Kong Stock Exchange,

raising a billion dollars in the IPO.

In 2012 Citron Research published a report accusing Evergrand of using accounting shenanigans

to mask their insolvency, pay bribes to build a land bank and overstate their asset

values.

Citrin claimed that Ever Grant had made several reckless investments and that

they were using Ponzi-style financing where new investments were being used to pay out returns

to old investors. The Hong Kong regulators held a market misconduct tribunal and found Citron

research, not China Evergrand, culpable of market misconduct. The tribunal and found Citron research not China Evergrand culpable of market misconduct.

The tribunal stated that Citron had used sensationalist language made false and misleading

allegations that were likely to alarm ordinary investors and that the report was reckless

and negligent. In 2016, Hong Kong-based accounting research firm, GMT Research, published a report called China

Evergrand, Auditors Asleep, which raised concerns that Evergrand's financial statements

did not present a true and fair view of its financial position and performance.

GMT visited 40 Ever Grant development sites and concluded that $23 billion of asset write-downs were needed,

which came to around three times shareholders' equity at the time.

GMT claimed that Ever Grant had allowed failed projects,

such as abandoned hotels, to build up on its balance sheet,

for years without appropriate write-downs. They took issue with how Evergrand classified the car parking spaces

and commercial properties in its residential

developments in its accounts. GMT said that Ever Grant had persuaded PWC to accept the classification

...