U.S. securities regulators sued Luckin Coffee Inc. on Wednesday. of accounting fraud, alleging that the company, a major competitor of Starbucks Corp. in China, it made sales and misplaced other financial metrics in order to make investors look better.
Luckin Coffee “materially” declared net operating income, expenses and losses “with the goal of falsely appearing to achieve rapid growth and increase profitability and meet the company’s profit estimates,” it said Wednesday. United States Securities and Exchange Commission.
Luckin Coffee, which has been under investigation for months, agreed to pay a $ 180 million fine to settle the charges without admitting or denying the allegations, the SEC said. The agreement is subject to judicial approval.
Luckin Coffee’s U.S. depository shares traded on the Nasdaq until mid-July and the company raised nearly $ 900 million in debt and equity investors.
“The agreement with Luckin is designed to help ensure that aggrieved investors have the best opportunity available to receive relief,” said Carolyn Welshhans, associate director of the SEC’s Enforcement Division.
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According to the SEC complaint, Luckin intentionally manufactured more than $ 300 million in retail sales from at least April 2019 to January 2020. The company allegedly used related parties to create counterfeit sales transactions in three different sales schemes.
The company began operations in October 2017 and quickly grew to thousands of stores across China. Its shares were made public in May 2019, with a first operation of $ 25, 47% above the IPO price of $ 17. Stock prices had fallen to less than $ 4 in over-the-counter markets on Wednesday.
According to the complaint, some Luckin employees, who the SEC did not name, tried to hide the fraud by inflating the company’s expenses by more than $ 190 million, creating a fake database of transactions and altering accounting records. and banking to reflect fake sales.
Luckin allegedly exaggerated his reported revenue by approximately 28% during the period ending June 30, 2019 and 45% for the period ending September 30, 2019, the SEC said.
During the fraud period, Luckin raised more than $ 864 million from investors in debt and equity, the SEC said.
After discovering his misconduct as part of the annual external audit, Luckin “reported the matter and collaborated with SEC staff, initiated an internal investigation, terminated certain personnel, and added internal accounting controls, “the SEC said.