China will pay 180 180 million in coffee to settle accounting-fraud claims

Lucky deliberately faked more than 300 million in retail sales between April 2019 and January 2020 using personal customer accounts and related parties and shell companies, the SEC said. According to the SEC, the company has spent 1.3 billion yuan, or 196 196 million, on payments to 13 suppliers of raw materials, human resources and delivery services.

The SEC’s findings confirmed the details of the plans, reported in May by the Wall Street Journal.

Lakin, at one time China’s Starbucks Corp. So there were high-level competitors, which were revealed in the Nasdaq stock market in 2019. Its shares fell 75% earlier this year due to the disclosure of financial report failures. This frustration will point to the inability of American regulators to monitor its debt to American-listed Chinese companies, a compliance gap that caught the attention of Congress this year.

Lakin’s executives and senior managers were involved in the fraud, the SEC alleged in its federal court complaint. The Journal reports that some of the companies involved in the Sham plans were linked to Charles Lu, the then chairman and controlling shareholder of Lakin.

Mr Lu walked out of Lakin’s board in July, and the Nasdaq listed Lakin’s shares on July 13. Lakin’s shares still trade over the counter.

The SEC on Wednesday did not announce any enforcement claims against the individuals but said in a press release that its investigation was ongoing. The SEC’s court complaint said the fraud came to light during Lakin’s annual audit.

In a statement, Lucky said the deal reflected his cooperation and reform efforts. The company’s board of directors and management is committed to a system of strong internal financial control, and adheres to the best practices for compliance and corporate governance, said Ginny Gue, current chairman and chief executive of Lakin.

The bank’s records were altered to cover up the irregularities and the alleged fraud led to a 45% increase in Lakin’s revenue in a quarter of 2019, the SEC said.

The SEC said Lucky made a presentation to the SEC in January 2020, as it raised $ 418 million from US equity investors and 44 6,446 million from bond investors, the SEC said.

In September, the Chinese government fined Lakin Coffee and companies involved in the counterfeit-selling scheme.

Lucky announced at its initial public offering in 2019 that it operates 2,370 stores in China and has more than 16.8 million customers. The company’s tremendous growth – it began operations in October-October 2017 – led investors to a hook-up story: China had a boom in coffee consumption, and Lakin would benefit from serving it.

But company officials were involved in the fraud in early April 2019, the SEC said, when employees and two organizations associated with Lakin’s officers and directors bought coupons that were used for coffee. The SCC’s complaint states that the coupons were never used, but Lucky “made fake orders from customers to ‘release’ the coupons and justified the recognition of the revenue,” the SEC’s complaint said.

In another scheme, which accounted for a large share of the fake 311 million counterfeit sales, some employees arranged coupon sales to shell companies, described as agents in Lakin that would resell vouchers to individual customers.

According to the SEC’s complaint, one of the activists involved in the scam emailed: “We will try to change the contact persons. [of the fictitious agents] With third parties, to reduce the number of our internal colleagues who are aware of such an issue. ”

Write to Dave Michaels at [email protected] and Jing Yang at [email protected]