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US regulators have punished Luckin Coffee with a $ 180 million fine after discovering that the scandal-ridden Chinese chain altered bank records and created a fake database as part of an effort to fabricate its accounts.
The Securities and Exchange Commission on Wednesday accused the company of defrauding investors by misreporting income and expenses, inflating its growth rates and underestimating its losses.
Luckin accepted the agreement, which is subject to judicial approval, without admitting or denying the allegations.
Once touted as Starbucks’ Chinese rival, Luckin was listed in New York last year and initially impressed, but shocked Wall Street in April when it said hundreds of millions of dollars in sales had been made. The shares were subsequently pulled from the Nasdaq Stock Exchange and shareholders expelled its founder, Charles Zhengyao Lu.
In a lawsuit filed in the Southern District of New York, the SEC charged Luckin with tampering with its books for a period that runs from at least April of last year to January of this year.
Officials said the company had “intentionally manufactured” more than $ 300 million in retail sales through the use of related party transactions. Luckin had tried to hide the fraud, they added, inflating its expenses by more than $ 190 million, creating a bogus database of operations and altering accounting and banking records.
The result, the SEC said, was that Luckin “materially overstated” reported revenue by more than 27 percent for the quarter ended June 30, 2019 and by 45 percent for the quarter ended September 30, 2019. 2019, so it underestimated its net losses.
During the period of the fraud, the SEC added, the Chinese coffee chain raised more than $ 860 million from debt and equity investors.
Stephanie Avakian, director of the SEC’s compliance division, said: “We will continue to use all of our available resources to protect investors when foreign issuers violate federal securities laws.”
Jinyi Guo, President and CEO of Luckin, said in a statement: “This agreement with the SEC reflects our cooperative and remediation efforts, and allows the company to continue the execution of its business strategy. The company’s board of directors and management are committed to a system of strong internal financial controls and best practices for corporate governance and compliance.
