Chinese coffee chain Luckin Coffee agrees to pay $180 million to end Securities and Exchange Commission’s probe, according to a report by Bloomberg on Thursday.
Luckin made the agreement without admitting or denying the regulator’s allegations, the report said.
Luckin allegedly misstated its revenue, expenses and operating loss in order to give investors the false impression that the company was enjoying miraculous growth, according to the report.
The settlement with the SEC reflects the company’s cooperation and remediation efforts, and enables the company to continue with the execution of its business strategy, said Luckin Chairman and CEO Guo Jingyi in a regulatory filing.
Luckin Coffee Inc’s net revenue was inflated by 2.12 billion yuan ($300.3 million) in 2019, the company said on its website on July 1.
The announcement was made after substantial completion of the independent internal investigation by its Special Committee of the Board of Directors.
The committee, which was formed on March 19, also found that the company’s costs and expenses were inflated by 1.34 billion yuan in 2019 and the fabrication of transactions began in April 2019.
The company’s former CEO Qian Zhiya and former COO Liu Jian allegedly participated in the fabricated transactions.
In addition, Luckin Coffee chairman Lu Zhengyao was asked to resign as a director and the chairman of the board, along with 12 other employees who participated in or had knowledge of the fabricated transactions.
Founded in 2017, Luckin operated about 4,500 stores by the end of last year in Chinese mainland. The coffee chain attracted customers by offering massive discounts and sought to reach 10,000 locations by the end of 2021.