Chinese coffee chain operator Luckin Coffee is reportedly set to be delisted from the NASDAQ stock exchange following the outing of its financial misconduct. The company revealed last month that an internal investigation had uncovered millions of dollars worth of fabricated transactions, all of which were fraudulently added by its own staff.

Luckin Coffee revealed in a statement on Tuesday that it had received a written notice from NASDAQ on Friday last week. The letter mentioned that the listing qualifications staff at the exchange has recommended the delisting of the company's shares following a review. The exchange stated that the decision to delist the company's shares was mostly based on "public interest concerns" over the company's actions to defraud its investors through the artificial bloating of its financial statements.

The letter added that Luckin Coffee had failed to immediately disclose the information of its findings. The company does not deny the misconduct of its staff but it does not agree with the exchange's decision. Luckin coffee stated that it will be filing a request to appeal the decision and it hopes to remain on the NASDAQ. Such a request is typically scheduled for a hearing within 45 days of its submission.

Separately, new local reports have revealed that Luckin Coffee has cut its workforce in Xiamen in China's Fujian province. The company reportedly laid off around  half of its staff members. Luckin Coffee has yet to make a formal announcemetn on why it had reduced its staff. 

The US exchange initially halting all trading activities of Luckin Coffee's shares back on April 7, after the company's stock prices plummeted by more than 83 percent to $4.39 per share following the news of its faked financial reports. The company had claimed that it was the one that originally brought the issue to the attention of regulators. Since then, the company has suspended and eventually kicked out its chief operating officer, Liu Jian, who was accused of instigating the fraudulent scheme.  

Liu, along with other staff members directly working under him, intentionally inflated transactions worth an estimated 2.2 billion yuan or roughly $309 million between the company's second and fourth quarters last year. The amounts of certain transactions were substantially inflated during the period to bolster the company's financial reports.  

The letter threatening to delist the company comes as the NASDAQ and other US equities markets tighten their regulations on Chinese firms wishing to list their shares in the country. This included the passing of tougher accounting rules and requirements for all companies aiming to raise more than $25 million through an initial public offering (IPO).

 Although the new rules do not specifically target Chinese companies, the immediate action by the exchanges has caused some friction between China and the United States. The situation has managed to exacerbate the already high tensions between both nations who are both in disagreement on issues such as trade and the origins of the coronavirus pandemic.