Luckin Coffee’s board initiates investigation into $300M potential fraud

China-based Luckin Coffee, the fastest growing coffee brand within the world, has over the years dazzled VCs, public market investors and, frankly, us with its dizzyingly high growth, expanding from a couple of stores and delivery kiosks to tens of thousands during a just a couple of years, quickly outpacing Starbucks’ aggressive expansion within the world’s second largest economy.
All those numbers though might not be what they appear .
In a filing with the SEC this morning, the company’s board announced that it's initiated an indoor investigation into the activities of its former COO, Jian Liu, who may have inflated revenues by the corporate by an early estimate of quite $300 million (RMB2.2 billion). Expenses are believed by the board to be similarly inflated. Legal firm Kirkland & Ellis is that the board’s counsel in its internal investigation.
Contact details for Jian Liu couldn't be located.
The alleged fraud is believed to possess begun within the second quarter of 2019, although further details will need to come because the company conducts its investigation. the corporate told investors in its filing that they shouldn’t believe the company’s recent financial statements, which are now believed to be inaccurate given the surfacing of this information.
Luckin shares, which trade as American Depositary Receipts, are down 70% immediately consistent with Yahoo Finance.
WTF are CDRs? (other than a potential trillion-dollar market)


The announcement of the investigation comes just days after the company appointed two new independent directors to its board. Last week, the company announced that Tianruo Pu, a seasoned accounting executive who was CFO of Zhaopin and UTStarcom, and Wai Yuen Chong, a supply chain executive who had stints at Charoen Pokphand Group and Luckin competitor Starbucks, had joined as independent directors and joined the company’s audit committee.
China’s Luckin Coffee raises up to $651M in upsized US IPO


Luckin Coffee debuted in its IPO in May 2019 with a hot $650.8 million offering on Nasdaq, just a few weeks after raising a private round of funding from Blackrock. the company was notorious for both its stratospheric growth and also for its ample losses, with its 2018 numbers (before the alleged fraud detailed by the company) showing $125 million in revenue and $475 million in losse