Following the outing of its fraudulent financial practices, Chinese coffee chain operator Luckin Coffee Inc has now fired its chief executive officer and its chief operating officer. The culling of its top executives is the company's latest attempt to restore its reputation after an internal investigation had found that some of its employees were deliberately inflating its sales numbers.
Luckin Coffee announced on Tuesday that it has removed its CEO Jenny Zhiya Qian and its COO Jian Liu from their respective positions. The company added that both people have also been removed from its board of directors.
Its current senior vice president and member of the board, Jinyi Guo, will be taking over the CEO position on an interim basis. Meanwhile, its head of store operations, Wenbao Cao, and its head of customer service, and strategic partnerships, Gang Wu, have been appointed to the board.
Starbuck's major rival in China initially revealed in April that most of its financial reports in 2019 were falsified by its COO and several other employees. Its financial report from the second quarter up to the fourth quarter of last year was reportedly bloated by as much as 2.2 billion yuan or roughly $310.77 million. Following the investigation, the company immediately suspended its COO and other employees that were working under him.
The Chinese firm clarified that it was the one that reported the anomaly to regulators in the first place and that it has been cooperating with all regulatory investigations from both China and the US ever since.
The scandal resulted in the US imposing tighter vetting processes for Chinese firms wishing to list their shares in the country. In China, regulators implemented new measures to curb fraudulent financial reporting practices, while also launching investigations into companies suspected of financial misconduct.
After the company's practices were made public, its share prices quickly plummeted, resulting in a massive valuation loss. In early April, Luckin Coffee's share prices dropped by more than 80 percent, forcing exchange operators to halt trading pending an investigation.
The company's chairman, Charles Zhenyao Lu, and its CEO were recently forced to surrender their shares to lenders after a separate company controlled by Lu's family had failed to make loan payments. Qian and Lu have been working together outside of Luckin Coffee before it was established. Qian, who became Luckin Coffee's CEO in 2017, also works as the COO for ride-hailing firm UCAR and auto rental firm CAR Inc, both of which were founded by Lu.
