Top watchdogs in Beijing have come out to condemn Luckin Coffee and roll out punishments for its fraudulent accounting activities.
The Ministry of Finance confirmed that Luckin Coffee had fabricated sales of 2.25 billion yuan (US$322 million) and revenue of 2.12 billion yuan, according to a statement, in an investigation involving two Luckin subsidiaries, 23 financial institutions and other related companies.
Separately, the State Administration for Market Regulation also confirmed Luckin’s «inappropriate competition behavior» including its inflated sales figures and subsequent promotion of this false success.
The Ministry of Finance claimed that it was taking action against Luckin which will be made public later. The State Administration for Market Regulation also said it was taking steps to punish the disgraced coffee firm and related third-party companies.
Overseas Listings
The announcements were made more than three months after Luckin’s accounting fraud reached headlines and led to its Nasdaq de-listing just 14 months after IPO. Luckin is not the only overseas-listed Chinese firm spotlighted in a financial scandal with Chinese jeweler Kingold more recently named and shamed for securing $2.8 billion in loans collateralized by 83 tons of gold bars which were later discovered to be just gilded copper.
Last week the China Securities Regulatory Commission said in a statement that it would amend and consolidate rules to better regulate Chinese firms listed abroad. The securities regulators will crack down on cross-border illegal activities, adding that it would adopt «zero tolerance» in toward misconduct such as accounting fraud, insider trading and market manipulation.
