The two global banks were named alongside Haitong International Securities as the largest participants in a series of margin loans to Luckin Coffee founder Lu Zhengyao, who subsequently defaulted.
Haitong ($140 million), Credit Suisse ($100 million) and Morgan Stanley ($100 million) reportedly extended margin loans to Lu backed by Luckin Coffee shares which collapsed after allegations accounting fraud emerged regarding billions of yuan in recorded sales. Barclays, Goldman Sachs and CICC also had exposure though relatively smaller, according to a «Bloomberg» report.
Luckin Coffee – the biggest rival to Starbucks in China – lost $5.5 billion in market value after it admitted to sales fraud.
Lucked Out
According to a statement from Goldman Sachs, an entity controlled by Lu reneged on $518 million of margin debt leading to the seizure of shares worth about $355 million – down from $2 billion before the scandal broke – though no details were mentioned about share disposal or potential booked losses. It added that lenders had «full recourse» to reclaim money from Lu and his spouse but underlined uncertainty about the sufficiency of their remaining assets.
The latest revelation also serves as a double Luckin whammy for Credit Suisse which is facing a shareholder suit alleging that the Swiss bank, alongside other underwriters, had made false and misleading statements to cause the stock price to be inflated.
