Caixin
Dec 17, 2020 06:43 PM
BUSINESS & TECH

Luckin Coffee to Pay $180 Million to Settle U.S. Securities Fraud Case

Disgraced Chinese coffee shop startup Luckin Inc. agreed to pay $180 million to settle fraud charges from the U.S. Securities and Exchange Commission (SEC), the regulator said in a statement Wednesday.

The firm, which once pledged to disrupt China’s coffee market, deliberately fabricated more than $300 million in sales between at least April 2019 and January this year, an SEC investigation found.

Employees concealed the fraud by creating a fake operations database and tampering with bank records, and the company lied to investors about the firm’s revenue, expenses and net losses, the SEC said.

After they were caught by an external audit the firm reported the matter and cooperated with U.S. regulators, initiating an internal investigation and “terminating certain personnel,” the regulator said.

The background: The sensational accounting scandal that enveloped China’s homegrown Starbucks rival made Luckin Coffee a household name for all the wrong reasons.

It not only brought the firm to its knees, but left shareholders nursing billions of dollars in losses. Luckin admitted to fraudulently inflating sales to the tune of 2.2 billion yuan ($336 million) in April, sending investors fleeing and wiping 80% off their Nasdaq shares’ value in a single day.

It also did significant reputational damage to other Chinese companies abroad, and has buttressed calls for U.S. securities regulators to have direct access to the books of Chinese companies that list there.

 Read More 
In Depth: Luckin Scandal Highlights Shortcomings in Cross-Border Regulation

Contact reporter Flynn Murphy (flynnmurphy@caixin.com) and editor Heather Mowbray (heathermowbray@caixin.com)

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