Guests were bused in and treated to a sit-down meal of seared tuna, filet mignon and seasonal berries, waited on by staff in suits and bow ties.

Watch: Chinese tycoon Chen Guangbiao attempts to sing "We Are the World"

Chen serenaded the guests with his signature rendition of We Are the World and a magic show. Volunteers, dressed up in green military uniforms, sang a Chinese patriotic song. Then a cart filled with cash was wheeled onstage.

But the giddy atmosphere fell apart when it was announced that the tycoon would not be handing out the cash, at the behest of the Mission, which was concerned the money would be used on drugs and alcohol.

After the announcement, several people tried to rush at Chen, who was shielded by guards, while others shouted insults at him, media reports said.

Speaking to the South China Morning Post, a member of the event’s organising team described the scene as “weird and troublesome”.

“Chen could have organised the luncheon in a better way,” the organiser said, requesting anonymity.

“At least he did not have to bring all those military uniforms – [viewed as] Halloween costumes [by] the Americans – and asked his volunteers to put on the uniforms and sing a patriotic song,” she said.

After the Mission intervened, an anxious Chen at first told his guests there was a change of plan and that he would distribute the US$300 at the shelter after the lunch.

Chen announced through a translator that he was heading to the New York City Rescue Mission -- which helped organise the lunch -- and invited guests to join him there.

Several homeless people were asked to pose with Chen in front of the cart of cash while holding dollar bills.

“He took photos with some of the guests holding US$300 on the stage,” the organiser told the Post. But at the end of the event, none of the guests received any donation in cash.”

As Chen spoke to a gaggle of Chinese journalists while dessert was being served, one guest started shouting.

“Don’t lie to the people!” Ernest St Pierre told AFP. “We came here for $300 but now he’s changed his tune.”

“This individual who’s filthy rich put it in the paper,” St Pierre, a former US Navy medic, told reporters.

Retired Vietnam War veteran Harry Brooks told reporters he would be “highly upset” if he didn’t get the cash, despite enjoying the food “very much.”

“I could use $300,” he said. “Clothing for one thing,” he said gesturing at his shabby attire when asked how he would spend it.

Not all guests were unhappy. Many said they enjoyed the food and called the experience “beautiful,” saying they were touched that someone had flown all the way from China wanting to help.

But as they were herded outside to queue up to get the bus back, complaints multiplied.

Quin Shabazz, 34, said he felt the homeless had been exploited and branded the lunch -- covered by a mob of TV cameras and reporters -- “a big publicity stunt.”

Al Johnson, 42, said he had been banking on the money to get his life together and go home to his family in Texas.

“This was going to change my life,” he said. “Fraud. This is fraud with a capital F,” he added. “I feel used for a photo op.”

Craig Mayes, executive director of the New York City Rescue Mission, was left to deny there had been any injustice.

“I’m really sorry. It was misrepresented in the paper,” he said.

Michelle Tolson, director of public relations at the Mission, said Tuesday that no cash would be handed out to individuals and that it had taken 1.5 months of negotiations to convince Chen to instead donate $90,000 to the group.

The money would be ploughed straight into the Mission’s $5 million yearly expenses to feed and house people, she said.

The shelter provides people with a hot meal, a clean shower and a safe bed, clothing and assistance in addressing their problems.

Chen, known for publicity stunts and reportedly worth an estimated $825 million, serenaded his guests with a rendition of the 1985 charity single “We Are the World.”

The smiling, bespectacled businessman said he wanted to give back after wealthy Americans had contributed to relief efforts after disasters in China.

“Hopefully, I will really lead the way to encourage other people who are in a position to help to follow through,” he said.

However, the rocky start to his philanthropy campaign in New York has not dented Chen’s confidence, saying he planned to hold more charity luncheons and keep his promise of treating 1,000 homeless people to fine meals.

“My homeless friends, please trust me, and trust the Mission,” Chen had said before leaving the restaurant, according to The New York Times.

Watch: Chen Guangbiao explains his business cards, and more

He is listed at number 227 on Forbes’ list of the 400 richest Chinese, with an estimated wealth of US$825 million.

Coalition for the Homeless says around 60,000 homeless men, women and children bed down in New York’s shelters and thousands more who sleep rough on the streets or elsewhere.

The number of homeless New Yorkers has risen by 75 percent since 2002 and in recent years has reached the highest levels since the Great Depression of the 1930s, according to the advocacy group.