A real estate tycoon in Lishui, Zhejiang Province, has received a death sentence for illegally raising 5.5 billion yuan ($800 million) from the public, reported the Procuratorial Daily on Monday.
Ji Wenhua, the president and legal representative of Lishui Yintai Real Estate Investment Company, was found guilty of fraudulent fund raising and embezzlement.
Five other shareholders and senior managers from the Lishui Yintai group received death sentences with reprieves and imprisonment.
Lishui Yintai Real Estate Investment Company Group was founded in 2002. It has several subsidiaries and branches in Zhejiang, Jiangxi and Hunan provinces.
From 2003 to 2008, Lishui Yintai real estate group concealed its continual losses while using advertising to convince the public it was profiting.
In order to continue operating, Ji and his accomplices raised funds from investors in Zhejiang and Hunan, knowing the company was unable to fulfill the contract.
As of 2008, when Ji and his accomplices were arrested, Lishui Yintai had raised 5.5 billion yuan from the public through fraudulent methods, the court said.
The intensified national macro policies in 2008 were a major cause of the capital chain break of the group, said Zheshang magazine.
During the depression of the real estate industry in 2008, moneylenders began calling their loans from the real estate industry.
Lishui Yintai group faced the same difficulty.
In addition, the procuratorate found Ji and the senior managers accused led a lavish life relying on the money they raised from stockholders. It was submitted as evidence of illegal fundraising with purpose, said Zheshang magazine.
Zhou Lei, a lawyer from Beijing-based Jianhao Law Firm, said it is illegal to raise funds from the public without the legally prescribed conditions and procedures.
"The real estate industry requires a large amount of money to ensure construction," Zhou said. "When the debt is due, they are inclined to raise funds to avoid going into receivership."