Luckin Coffee concludes internal probe ahead of vote on chairman removal

FILE PHOTO: A Luckin Coffee logo is seen at a closed store in Beijing, following the novel coronavirus disease (COVID-19) outbreak, China, April 16, 2020. REUTERS/Tingshu Wang

Luckin Coffee Inc said on Wednesday it was winding up an internal probe on fake annual sales of about $300 million as it prepares to vote on a proposal to remove Founder-Chairman Charles Zhengyao Lu on July 2.

The move by the troubled Beijing-based coffee chain follows a request by the majority of the directors based on a special committee’s finding that the CEO and COO were involved in fabricating sales numbers.

The coffee chain, according to a media report, sold vouchers redeemable for millions of cups of coffee to companies that had ties to Lu, helping it record a sharp rise in sales.

Luckin said the committee found that 2019 sales were inflated by 2.12 billion yuan ($300.1 million), and costs and expenses by 1.34 yuan billion ($189.7 million).

Fortunes of Luckin, which directly competes with U.S.coffeehouse Starbucks, have nosedived since the probe was disclosed in April, ending up with the Nasdaq suspending the trading in its shares on Monday.

The probe found funds “were funneled to the company through a number of third parties associated with the company employees and/or related parties.”

Lu, who is the controlling shareholder of Luckin, is also the founder of auto-rental firm CAR Inc and Chinese ride-hailing firm Ucar Inc.

During the investigation, Luckin sacked its CEO and COO, both executives who had previously held top positions at Lu’s other firms.

The company said 15 employees are facing disciplinary actions and 12 others who participated in the transactions would be terminated.

Luckin is also in the process of ending ties with all third parties involved in the fabricated transactions, it said, without revealing any names.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.