Luckin Coffee to Pay $180M Penalty in Settlement with SEC

Luckin Coffee to Pay $180M Penalty in Settlement with SEC
(Source: PYMNTS)

On Dec. 16, the Securities and Exchange Commission (SEC) announced that the accounting-fraudulent Luckin Coffee Inc. agreed to pay a $180 million (1.17 billion yuan) penalty for previous charges concerning the company’s fabricated transactions.

According to the SEC’s complaint allegations, the cash-burning coffee chain intentionally fabricated more than $300 million in retail sales from April 2019 to January 2020. Moreover, some of its employees attempted to hide the fraud by “inflating the company’s expenses by more than $190 million.”

“The settlement with Luckin is designed to help ensure that harmed investors have the best available opportunity to receive relief,” commented Carolyn M. Welshhans, Associate Director of the SEC’s Division of Enforcement, on the main purpose of the settlement.

However, the company has neither admitted nor denied the claims, which came in the allegation filed in a court in the Southern District of New York, while consenting to payment.

Prior to the settlement, which was approved by the federal judge, the Chinese coffee brand delisted from the Nasdaq and co-founder Charles Zhengyao Lu stepped down as chairman.

Despite monetary punishment from the SEC, Chinese market regulators have also imposed penalties on Luckin. In September, Chinese market regulators also fined Luckin, as well as 43 companies involved in the forgery, an overall 61 million yuan (approximately $9 million) for fake operation data and misleading the public.

SEE ALSO: Luckin Coffee and Complicit Companies Fined for Millions of Fake Transactions

And in October, the State Administration for Market Regulation disclosed fines of 2 million yuan (about $300,000) for the coffee chain for forging transactions.