Vietnam’s ‘blazing furnace’ sees real estate mogul sentenced to death for $12 billion fraud. It’s the biggest eruption yet in Asia’s volcanic housing bust

Vietnamese real estate tycoon Truong My Lan has been sentenced to death by a Vietnam court for her involvement in a $12 billion fraud case. It’s one of the most severe punishments ever for white-collar crime—and caps the biggest financial fraud case in the country’s history, with total damages amounting to the equivalent of 3% of the country’s GDP. The 67-year-old chairwoman of real estate company Van Thinh Phat Group was arrested in 2022, facing charges that include bribery of government officials and violation of bank lending rules. In

The charges echo the epic collapses of other real-estate fortunes in some of Asia’s largest economies, particularly China. There’s Country Garden Holdings chairwoman Yang Huiyan, for instance, whose company suspended shares last week following its default on overseas debt in October of last year as just the latest developments in its deepening debt crisis. When the company missed its overseas debt payment, it had $187 billion in liabilities, and had been unloading assets and selling shares to stave off its debt obligations for months. In November, Country Garden said it needed to repay nearly $15 billion in debt within the next 12 months, while disclosing a $7.1 billion loss for the first six months of the year.

Its rival real estate group, Evergrande, led by CEO Hui Ka Yan, filed for bankruptcy protection last August, while China's securities regulator hit the property giant with a $78 billion fraud accusation for inflating its revenue from 2019 through 2020. It's one of the largest fraud cases in the country’s history. The CEO was arrested last September on suspicion of financial crimes, Evergrande said in a filing to the Hong Kong stock exchange.

The biggest charge against My Lan was embezzling funds from Saigon Commercial Bank (SCB) between February 2018 and October 2022. The five-week trial was conducted under tight security at the Ho Chi Minh City People’s Court, where more than 80 other people including central bank officials have been charged in the case, including My Lan's husband and niece.

My Lan embezzled about $12 billion, and was convicted of taking out $44 billion in loans from the bank between 2012 and 2022, according to Vietnamese online newspaper VN Express, accounting for more than 93% of the bank’s lending during that period. The verdict requires her to return $27 billion, a sum that exceeds the market capitalization of most Vietnamese banks. It prompted panic among depositors of SCB, triggering a run on the bank and, ultimately, the State Bank of Vietnam taking control of the lender. Since Vietnam’s criminal laws started applying embezzlement to non-government individuals in 2018, VN Express reported, My Lan's actions have been classified under that charge.

My Lan’s defense lawyers argued that she only controlled about 15% of the bank, and that she did not have an official position there after a merger transaction in 2011. Court judges, however, found that Lan held a controlling stake of more than 90% of the bank through proxies.

The ultra-rare white-collar death penalty sentence

Still, the death penalty is a rare sentence for economic crimes, to say the least. One of the few other, also widely publicized death penalty convictions for a corruption charge was in 2013, after two former executives of Vietnam National Shipping Lines were found guilty of embezzlement.

In Vietnam, the death penalty can be awarded for 22 offenses, including murder, armed robbery, drug trafficking, rape, sexual abuse of children, and for economic crimes such as graft, corruption, fraud, and embezzlement. The majority of death sentences in the country are for drug-related crimes, according to Amnesty International, which said in a 2023 report that more than 102 people received death sentences in 2022. The number of executions were unclear due to “secrecy surrounding figures and limited access to information.” And while a death sentence for embezzlement is rare, it doesn’t take much to prompt it: embezzling as little as 500 million Vietnamese dong, or $20,000, from government funds can qualify for a death sentence, according to a Washington Post report.

Vietnam is in the midst of a years-long anti-corruption campaign, which has been raging since 2016 and led by Communist Party Secretary Nguyen Phu Trong. In fact, the Communist Party has named its crackdown the "blazing furnace," for the party’s intense focus on reducing the country’s economic corruption. The campaign sparked resignations from two of the nation’s presidents in just two years, according to the Associated Press, and comes as the nation's been rising as a global supply chain hub for companies like Apple and Samsung Electronics, with both tech giants relocating manufacturing units to the country in the last year.

China’s real estate industry has been devastated by the two major defaults. The IMF looked at the sector in February, and contextualized the over 60% fall in housing starts (i.e., new construction) relative to pre-pandemic levels: "a historically rapid pace only seen in the largest housing busts in cross-country experience in the last three decades." ResiClub's Lance Lambert reported that America's housing slump pales in comparison to China's, with continuing sharp declines in home sales, home construction, and residential investment, and falling home prices, to boot.

On April 2, real estate group Country Garden stated "due to the continuous volatility of the industry,” the group’s operating environment is “becoming increasingly complex,” before announcing its earnings report would be delayed.

In the aftermath of fraud allegations for Evergrande Group, the company’s mainland business, Hengda Real Estate, was also fined $583.5 million, and its CEO faces a potential lifelong ban from China’s financial markets. It’s also been ordered by a Hong Kong court to liquidate, and Chinese authorities recently began examining the role of PricewaterhouseCoopers LLP in China in regards to Evergrande Group’s accounting practices.

And the bad news for property giants keeps coming. Shenzhen-based real estate group China Vanke, which also ranked second in sales in the country last year, reported a 46% plunge in profit over 2023.

This story was originally featured on Fortune.com