Beijing watchdogs to punish Luckin Coffee, related firms after confirming US$300 million accounting fraud
- Ministry of Finance says it will take punitive action against Luckin, after its investigation confirmed the coffee chain’s accounting fraud
- Announcement from two regulators places the beleaguered coffee chain in the spotlight again after the scandal led to its delisting from Nasdaq
Two Chinese regulators plan to punish Luckin Coffee after their investigations confirmed a US$300 million accounting fraud by the chain once touted as the country’s answer to Starbucks.
The Ministry of Finance has finished its investigation into two Luckin subsidiaries, as well as related companies and 23 financial institutions relating to the scandal, according to an announcement on its website on Friday night.
It confirmed the coffee chain, based in Xiamen, Fujian province, fabricated sales of 2.25 billion yuan (US$322 million) and revenue of 2.12 billion yuan, and said it will move take punitive action which will be made public later.
In a separate announcement, the State Administration for Market Regulation on Friday said it is taking steps to punish Luckin and related third-party companies for their misconduct, stressing the need to defend fair competition and market order and protect consumers.
It confirmed Luckin’s “inappropriate competition behaviour,” noting the company fabricated sales figures and then promoted the fake numbers.
The announcements came less than four months after Luckin’s US$300 million accounting fraud first came to light and shocked the market. It prompted regulators to take steps to delist the company from the Nasdaq stock exchange barely 14 months after its debut.
The scandal led to Washington tightening scrutiny of Chinese companies listed on American bourses, stoking a broader spat between regulators in the world’s two largest economies which have already been entangled in rising tensions.