Offshore family trusts have long been regarded as a "Noah's Ark" for preserving family wealth. However, a recent high-profile case has prompted a deeper examination of these trusts in the financial markets. In response to the actions of Xu Jiayin, founder of EVERGRANDE, failing to comply with asset disclosure orders, the Hong Kong High Court has made a pivotal ruling, officially appointing the liquidator of EVERGRANDE as the administrator of Xu Jiayin's total assets. The scope of this takeover is extensive, encompassing not just assets registered in Xu's name, but also including assets potentially tied to trust structures controlled indirectly through more than a dozen offshore companies.
Multiple lawyers have informed that this action represents a thorough investigation into Xu Jiayin's personal assets and, for the first time in such a significant case, clearly delineates the legal boundaries concerning the effectiveness of asset isolation in offshore trusts, indicating that "offshore" is by no means a legal haven. This ruling has sparked widespread discussion in the market regarding whether Xu Jiayin's offshore family trust has been effectively "pierced."
"The ruling incorporates assets that may involve trust structures within its takeover scope as a temporary legal measure, rather than a final judgment. It is a step towards regulating and controlling Xu's assets, not a determination of property disposition or ownership," said Liu Xinyuan, a leading lawyer from Shanghai Qinbin Law Firm (Beijing).
Huang Lichong, president of Huisheng International Capital, explained that the court's action serves as a "supportive measure" to enforce a global asset freeze and disclosure order previously issued to Xu. This step was taken partly due to the judge's finding that Xu was "completely non-compliant" with the disclosure order, presenting a risk of asset flight, making it necessary to appoint a liquidator to investigate and control the actual ownership structures and accounts, including interests potentially held through companies and trusts.
"This step is aimed at preserving and clarifying assets; it involves an in-depth investigation, but it's not yet clear whether some assets will be deemed illegal and transferred to the trust. Only if some assets are ruled illegal will they possibly be allocated to creditors under relevant laws," Huang stated.
The trajectory of the ruling: From asset freeze to full takeover. EVERGRANDE was ordered into liquidation on January 29, 2024. Subsequently, the Hong Kong court appointed Edward Simon Middleton and Huang Yongshi from Anmai Consulting Ltd. as joint liquidators, who began pursuing global asset recovery.
In March 2024, the liquidators filed a lawsuit in the Hong Kong High Court against Xu Jiayin, Ding Yumei, former CEO Xia Haijun, former CFO Pan Darong, and three associated entities involved with Xu and Ding, aiming to recover approximately $6 billion (around 43.8 billion RMB) in dividends and remuneration from 2017 to the end of 2020. On March 22, 2024, EVERGRANDE initiated legal action against Xu Jiayin and others, accusing Xu of transferring assets through offshore structures.
Statistics show that from 2009 to June 2021, EVERGRANDE reported cumulative net profits of 173.388 billion RMB, managing significant dividends nearly every year, totaling approximately 70 billion RMB, with Xu and affiliated parties cashing out approximately 54 billion RMB through dividends.
In June 2024, the Hong Kong judge issued a Mareva injunction (a temporary order aimed at freezing the defendant's assets to prevent asset dissipation during legal proceedings) against Xu, prohibiting him from disposing of assets valued at up to $7.7 billion globally. Xu was also ordered to submit a sworn statement confirming information about all assets valued at HKD 50,000 or more within seven days.
However, the ruling documents indicate Xu failed to comply with the disclosure order. With asset status unclear and the freeze at risk of failing to be enforced, EVERGRANDE issued a "liquidator's subpoena" on April 3, 2025, seeking to appoint the liquidators as Xu's asset administrators.
On September 16, 2025, the Hong Kong High Court ruled in favor of the takeover application, empowering the liquidators to "identify, preserve, and investigate" Xu's total assets, including those potentially linked to trust structures through numerous offshore companies; concurrently, the administrator was expressly prohibited from directly disposing of assets, only being allowed to prevent asset dissipation under independent lawyer supervision.
The judge stated in the ruling, "Given Xu Jiayin's complete failure to disclose his assets, it is essential to appoint a receiver as a last resort; otherwise, the injunction would not be sufficiently effective to maintain the status quo."
The Hong Kong High Court's ruling is based primarily on the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the principles of equity. The court emphasized that Xu's non-compliance with the asset disclosure order constitutes contempt of court, which may lead to harsher legal measures, such as the issuance of a takeover order. Non-compliance not only impairs the fairness of judicial procedures but may also be seen as an attempt to transfer or conceal assets, thereby impacting the legitimate rights of creditors, as explained by Song Jingyi, a lawyer at Beijing Yingke Law Firm (Guangzhou).
Regarding EVERGRANDE's debt issues, the liquidators disclosed in their progress report that as of July 31, 2025, they had received 187 creditor proof forms, indicating a total claim amount of approximately HKD 350 billion (about $45 billion), which significantly exceeds EVERGRANDE's reported debt of $27.5 billion by the end of 2022. Currently, only HKD 2 billion (approximately $255 million) has been liquidated, of which around $167 million has been recovered.
As for whether Xu Jiayin's offshore family trust falls within the scope of the takeover, the ruling provided clarification. The ruling documents indicate that Xu Jiayin's side argued that the court's injunction should not cover the associated offshore companies, attempting to isolate potential trust assets from the takeover's purview. They pointed out that the court's injunction was aimed solely at Xu himself and a few defendants, not encompassing the fourth defendants, New New (British Virgin Islands) Ltd., or any of the other fourteen companies listed in "Schedule 1." Therefore, they contended that the court should not appoint a receiver for the fourth defendant's assets nor permit a receiver to investigate the affairs of the "Schedule 1" companies or register any of their assets.
These offshore companies have been viewed externally as entities through which Xu Jiayin indirectly controls family trust assets. Public records show that around 2019, Xu Jiayin and his ex-wife Ding Yumei established a single-family trust fund in the U.S. with a scale of up to $2.3 billion, designating their two sons as beneficiaries. Xu Jiayin's argument was explicitly rejected by the court. The ruling emphasized that the fourth defendant and the offshore companies listed in the Schedule had been distinctly defined as "companies associated with Xu Jiayin" in Attachment C of the injunction.
Accordingly, the court considered it necessary to grant the receiver the authority to access the documents of these companies to ensure compliance with the injunction, justifying its reliance on the "Chabra jurisdiction" (a kind of asset freezing order). This jurisdiction allows courts in specific situations to include non-primary defendants and third parties whose assets are effectively controlled by the defendant within the scope of the injunction.
The judge underscored that in cases involving "serious international fraud," the focus should not be rigidly on legal ownership but on examining "the substantive reality of control." The ruling states that if a defendant has established a network of offshore companies and trusts to hold their controlled assets, this is evidently aimed at circumventing enforceability of the judgment, prompting the court to act to prevent orders from being evaded by "obscure offshore trusts and companies." Furthermore, the judge specified that even if assets are placed under full-discretion trusts, courts can still exercise Chabra jurisdiction if the relevant defendant maintains substantial control over the assets.
Legal experts pointed out that the critical factor allowing the inclusion of offshore trusts within the scope of the takeover hinges on the examination of "substantial control." Liu Xinyuan mentioned that the court did not outright deny the independence of the trust but deemed it necessary to proceed with a takeover due to Xu's actual control over trust assets. This move "effectively pierces the illegal desires and claims of the Xu family to evade debt and conceal illegal gains through trusts," yet it does not directly negate the legal structure of the trust.
Currently, the liquidators have initiated global asset recovery procedures. In December 2024, the EVERGRANDE liquidator Anmai Consulting Ltd. took control of Xu Jiayin's offshore entity holding private jets and listed the aircraft for sale. Meanwhile, several luxury properties, private jets, luxury cars, and yachts associated with Xu Jiayin and Ding Yumei have been frozen by the court.
In the U.S., the liquidators have requested the Delaware court to annul the $2.3 billion trust on grounds of "fraudulent transfer." Whether the "receiver order" equates to being "pierced" is a matter of attention. The issuance of the "receiver order" by the Hong Kong High Court has prompted discussions regarding the absolute safety of offshore trusts. If Xu Jiayin indeed indirectly controls trust assets through the aforementioned offshore companies, does the receiver's takeover imply that the trust has been "pierced"?
Legal professionals have pointed out that the current measures are more accurately characterized as "penetrating investigation" and "temporary preservation," aimed at taking control over assets to prevent their transfer, but have not yet reached a stage where the trusts have been legally "pierced" and their assets disposed of. Liu Xinyuan emphasized the fundamental distinction between "penetrating investigation" and "piercing of trust." He stated that the ruling aligns more with a penetrating investigation of Xu Jiayin's trust property.
The essential difference lies in the former emphasizing procedural takeover investigations, while the latter relates to legal classifications of asset ownership and legality. "At present, the court has not directly ruled on the trust being pierced, but has incorporated assets that may involve trust structures into the takeover scope based on substantial control. The independence of the trust has not been fully negated; however, due to Xu Jiayin's control over assets related to the trust, the court deemed it necessary to proceed with a takeover to protect the interests of creditors," stated lawyer Song Jingyi in an interview.
"The Hong Kong court's ruling clarified that Xu Jiayin and his controlled entities are suspected of illegally transferring assets and infringing on creditors' relevant rights, thus designating the EVERGRANDE liquidator as the receiver. However, based on current information disclosed, the receiver's powers are limited to taking over and regulating the relevant assets and have not yet reached a state of complete disposal, indicating that we are close to a state of 'piercing' but not completely there yet. Without further court documents regarding the trust, the receiver cannot directly dispose of the relevant assets," as noted by Liu Xinyuan.
Huang Lichong also stated that the receiver's authority is confined to the boundaries of the court order, primarily aiming to identify, control, and preserve assets rather than immediately disposing of trust assets. The court, via the global freezing order, granted the receiver authority under Section 21L of the High Court Ordinance to manage the assets and information related to Xu Jiayin's name and actual control, including offshore trusts, in the event of non-disclosure (dishonesty) and a risk of asset flight.
The intent of the current ruling is preservation, not liquidation of the trust, with any disposal requiring subsequent court permissions or advancements in execution after successful entity litigation. Notably, media reports indicate that Xu Jiayin's trust is established in the U.S. under Delaware law. The cross-border execution of this receiver order has become another significant focal point; however, the court documents from Hong Kong do not disclose all establishment details. Huang Lichong believes that if this information is accurate, it involves cross-border debt collection, which will encounter issues of jurisdiction and procedures. The receiver's actions in Hong Kong regarding the Mareva injunction must be executed in the U.S., typically relying on Chapter 15 of the U.S. Bankruptcy Code to recognize foreign proceedings, but EVERGRANDE previously withdrew its Chapter 15 bankruptcy application; thus, the receiver must apply again, needing to comply with U.S. law before discussing coercive issues.
If the trust were a Delaware "asset protection trust," it would have statutory protections and burdens of proof for creditors, with a statute of limitations for pursuing fraudulent transfers (generally four years, coupled with discovery rules). "Generally speaking, trusts do have rights of defense; however, fraudulent transfers can be negated," Huang added, indicating that the receiver will need to demonstrate that the trust constitutes "self-benefit/substantial control," has harmed creditors, or was insolvent at the time of the transfers, and must conduct cross-entity and cross-account financial tracing. The core rationale for the appointment of a receiver lies precisely in Xu Jiayin's refusal to disclose and the risks associated with asset flight, allowing the receiver to seek account books and control from trustees and third parties to provide evidence for lawsuits in the U.S.
So, what is the likelihood of "annulling/piercing" the trust in the U.S.? Huang Lichong opined that if substantial investments occurred during periods of debt default and insolvency, there being obvious pathways and substantial control through related companies, and if a lawsuit is initiated within the "four years + discovery period," with Chapter 15 acknowledgment or equivalent remedies obtained, the success probability could reach a "moderate to high" level (approximately 40%–60%). However, if major investments were made prior to the window period, with solid evidence of trust governance and the trustee's independence, the chances of success would be low.
Liu Xinyuan also remarked that the U.S. trust law framework is mature, and various states have trust legislation that lowers the uncertainty of trusts being pierced, as well as clear timelines for fraudulent transfer actions, making it not easy to pierce a trust. However, there is no fundamental conflict between the judicial spirits of China and the U.S. if enough evidence can be provided showing that Xu Jiayin's trust assets are involved in "fraudulent transfers" significantly harming creditor interests, U.S. courts may also recognize and enforce cross-border rulings.
The legality and independence of offshore trusts represent a bottom line. Many legal professionals indicate that this ruling addresses not just specific cases but also serves as a warning regarding the architecture and management of offshore trusts, clearly revealing the legal boundaries concerning the "asset isolation" effectiveness of family trusts. Bai Wenxi, chief economist for the China Enterprise Capital Alliance, emphasized that the security of a trust is not absolute, and its effectiveness is rooted in the independence of its structure and the legality of its establishment purpose. True "asset isolation" requires several key prerequisites: funding for the trust must be legally clean; the settlor must relinquish all control; and the trustee must possess independent and regulated qualifications. "If the funding source is illegal, it is understandable that the trust account can be 'pierced,'" commented a legal expert.
Bai Wenxi remarked that this ruling highlights the judicial principle of "substance over form," indicating that regardless of how complex an offshore trust or discretionary trust structure may seem, as long as the court deems that the relevant defendant maintains substantial control over the assets and that the establishment purpose appears to harm creditor interests, jurisdiction can be exercised for penetrating investigations and takeovers. As the judge emphasized in the ruling, regardless of how complex the discretionary trust is, as long as substantial facts indicate that the relevant defendant can control the trust's operation, the court may exercise freezing orders.
Analysts point out that this case carries implications for high-net-worth individuals and the wealth management industry, emphasizing that "offshore family trusts" are not an all-encompassing "safety deposit box," and offshore trusts are not legal voids. Wealth protection must be grounded in legality, good faith, and compliance; any attempt to evade debt repayment obligations or regulatory oversight using technical structures may be subject to judicial penetration. "This case may raise concerns among certain groups, but in reality, there are no legal voids in the world," a senior figure in a wealth management firm stated.
Song Jingyi indicated that such rulings may somewhat weaken blind faith in the asset isolation functions of trusts and prompt future upgrades in compliance examinations and standards for independent evidence preservation when establishing trusts. Multiple lawyers believe that as a complex cross-border case, the future of Xu Jiayin's offshore family trust will largely depend on the liquidators’ subsequent investigation results and the cooperation and dynamics between the Hong Kong and U.S. courts in cross-border judicial collaboration. Regardless, the Hong Kong High Court's ruling has already reset the market's perception of the safety of offshore trusts with its robust penetrating power, and its ongoing developments remain closely watched.
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