Carol Huang
Jul 2, 2020

Luckin Coffee finally confirms $300 million revenue exaggeration

Formal admission came in a filing with the US Securities and Exchange Commission.

Luckin Coffee finally confirms $300 million revenue exaggeration

After an investigation, Luckin Coffee has finally confirmed $300 million in revenue fraud.

In an SEC filing, the company’s Special Committee, which was investigating claims that originally surfaced three months ago, confirmed that the formerly high-fliying coffee chain had indeed fabricated revenue.

The Special Committee found that the fabrication of transactions began in April 2019. As a result, the company’s net revenue in 2019 was inflated by approximately RMB2.12 billion (US$300 million). Costs and expenses for the year were inflated by RMB1.34 billion ($189.6 million).

The report said that ex-CEO Qian Zhiya and ex-COO Liu Jian were both involved in the fraud. The company already delisted from Nasdaq on June 29. 

In the announcement, Luckin said the Special Committee and its advisors reviewed over 550,000 documents collected from over 60 custodians, interviewed over 60 witnesses and performed extensive forensic accounting and data analytics testing to confirm the fraud.

The investigation started three months ago when Luckin Coffee admitted its sales figures might have been inflated. That announcement was triggered by a report released in January by short-seller Muddy Waters, which claimed Luckin Coffee overstated the number of coffees sold in each store.

The scandal led to increased scepticism of all Chinese brands. China-listed companies including iQiyi, GSX and TAL all saw their stocks shorted after Luckin Coffee's case came to light.

Source:
Campaign Asia

Related Articles

Just Published

5 hours ago

Time to Nike-ify DEI

Why we need to rescue the concept of 'merit' from being solely a Trump card.

13 hours ago

Starbucks APAC VP Samuel Fung steps down

The former VP of Product and Marketing is a two-time Campaign Power List honoree. He exits the role after nearly 12 years with the company.

15 hours ago

Can ads make us feel something, even if they can’t ...

The best ads are not just about sales; they resonate deeply with consumers, says the co-founder and creative director of Itch.

15 hours ago

Santander on its shift to one global agency, why it ...

Bank has been rethinking its $1 billion-a-year spend on advertising and communications to drive consistency and effectiveness in age of AI.