Luckin Coffee fires CEO, COO after internal investigation into fabricated transactions

Luckin Coffee, often viewed as China’s answer to Starbucks, has fired its chief executive and chief operating officer after an internal investigation into fabricated transactions that roiled investors and undermined the trust in Chinese financial reporting.

According to a filing on Tuesday, The New York-listed coffee chain’s board has terminated CEO Jenny Qian Zhiya and COO Liu Jian and “demanded and received” their resignations from the board, according to a filing and company statement on Tuesday. The shake-up took effect on Monday.

The move follows last month’s suspension of Liu for alleged misconduct that erased US$2.1 billion of its market value since then, stoked a sell-offs in companies linked to its chairman and backer Charles Lu Zhengyao, and triggered potentially costly lawsuits from shareholders and bond investors.

The episode added to a long list of accounting shenanigans among some foreign-listed Chinese companies over the years, while inflaming US-China ties against the recent backdrop of trade war. China’s market regulators are probing the case, underscoring efforts to repair the image and trust in its US$7.9 trillion onshore stock market.

In the April 2 announcement, for alleged misconduct, the Xiamen-based start-up said its turnover was inflated by about 2.2 billion yuan (US$309 million) between the second quarter and the fourth quarter of 2019, and certain costs and expenses were “substantially inflated” through fabricated transactions.