Luckin Coffee Crashed Out

Luckin Coffee has “substantially” completed its independent internal probe into the sales fraud scandal that implicated its top executives. The independent investigation found that the Chinese coffee chain’s 2019 sales were inflated by 2.12 billion yuan ($300 million) and its expenses by 1.34 billion yuan ($190 million) that year. The fraud began in April 2019, a month before Luckin made its public market debut in the United States.

Luckin disclosed the financial scandal and independent probe a year later, estimating that about 2.2 billion yuan of its 2019 sales were fabricated, slightly above the investigation’s eventual findings.

Over the course of the probe, investigators reviewed over 550,000 documents and interviewed more than 60 witnesses. Evidence shows that former CEO Jenny Zhiya Qian, former COO Jian Liu and other employees who reported to them fabricated transactions and used third parties with ties to company employees to funnel funds supporting the falsified transactions to Luckin.

Luckin’s shares were delisted from the Nasdaq on Monday. The exchange had served the company with two delisting notices, one in May related to the sales fraud and a second in June for not filing its annual report.

The company raised $561 million in its initial public offering after pricing shares at $17. The stock began trading publicly on the Nasdaq in May, surging 18% in its debut. Shares peaked in January at $51.38 but tumbled as the coronavirus outbreak spread in China. The stock plunged in April after Luckin disclosed the fraud.