According to the SEC, Luckin Coffee willfully fabricated over $300 million in retail sales from April 2019 to January 2020. It used related parties to create false sales transactions through three separate purchasing schemes.
Certain Luckin Coffee employees inflated its expenses by more than $190 million, created a fake operations database, and altered accounting and bank records in an effort to hide the fraud.
Additionally, the SEC alleged that the Chinese coffee company raised over $864 million from and equity investors during the period it committed the fraud. The Commission commenced an investigation after the company reported the accounting irregularity, which was discovered during an annual external audit of its financial statements.
“Public issuers who access our markets, regardless of where they are located, must not provide false or misleading information to investors,” said, SEC Division of Enforcement Director Stephanie Avakian,
“While there are challenges in our ability to effectively hold foreign issuers and their officers and directors accountable to the same extent as U.S. issuers and persons, we will continue to use all our available resources to protect investors when foreign issuers violate the federal securities laws,” she added.
