Luckin coffee has reached a $180m settlement with the US Securities and Exchange Commission over alleged financial fraud.
Chinese coffee chain Luckin coffee has reached a settlement with the US Securities and Exchange Commission (SEC) over financial fraud and is subject to supervision, the company said in a statement on its official Weibo account Monday morning. Luckin coffee paid a settlement of $180 million in exchange for accounting fraud allegations, according to an earlier SEC filing.
Luckin said in a statement that the company is operating normally and will continue to cooperate with regulators in the future, regarding compliance as a top priority.
Lu media quoted the SEC as saying that Luckin coffee faked sales of more than 300 million US dollars from April 2019 to January 2020 by making false transactions with related companies. Luckin itself released the results of an internal investigation in April, alleging that liu Jian, the company’s chief operating officer, was involved in financial fraud involving a transaction value of about 2.2 billion yuan ($340 million).
Against that backdrop, Luckin coffee faces a class-action lawsuit in the United States, accusing it of making false and misleading statements in violation of U.S. securities law, the report said.
The report also said Luckin had settled with the U.S. but did not respond to any of the U.S. allegations in the settlement document.
On June 29, Luckin stopped trading on the Nasdaq stock Exchange and began the process of closing. The stock was trading at $1.38 a share, more than 90% off its ipo price of $17.
On July 31, The Ministry of Finance of The People’s Republic of China announced the progress of its investigation into the financial fraud of Luckin Coffee, pointing out that from April 2019 to the end of 2019, Luckin increased the transaction volume by 2.246 billion yuan (the same as below) through the fictitious commodity coupon business, inflated revenue by 2.119 billion yuan, inflated costs and expenses by 1.211 billion yuan, and inflated profit by 908 million yuan.
On October 12, the State Administration for Market Regulation imposed an administrative penalty on Luckin and fined it 2 million yuan.
Luckin coffee, founded in January 2018, is the fastest growing star company in China in recent years. It was listed on NASDAQ in the United States only two years after its establishment. It once had more than 4,000 cities in China and was known as the “Starbucks of China” to the outside world.
But in April, luckin faced class-action lawsuits from U.S. investors and official investigations in China and the U.S. over allegations of fraud totaling 2.2 billion yuan.
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