US-listed Chinese jeweler Kingold Jewelry has been accused of using fake gold to obtain loans worth more than 20 billion yuan or $2.8 billion. The accusation of large-scale fraud against the company could become the second-largest major scandal to hit US-listed Chinese firms this year, following the confirmed manipulation of Luckin Coffee's financial statements.

According to a report from a Chinese financial news outlet, Kingold Jewelry allegedly used gilded copper, which it claimed was real gold, as collateral to obtain several loans. If proven true, the scandal could further fuel the US' campaign to expel Chinese firms from the country's capital markets.

The same report claims that Kingold Jewelry has denied all of the accusations, with the company stating that it is willing to cooperate with any investigation. Sources with knowledge in the transactions claimed that Kingold Jewelry used as much as 83 tons of fake gold as collateral to obtain financing, which would be the country's largest gold loan fraud if proven true.

The alleged fraud was reportedly discovered after Dongguan Trust, one of the company's lenders, decided to liquidate the company's collateral to cover its unpaid debt. After news of its alleged fraud was made public, Kingold Jewelry's share prices on the NASDAQ plunged by almost 25 percent on Monday.

Kingold Jewelry is one of China's largest jewelry manufacturers and gold processors. The company, which was founded in 2002, mainly designs 24-karat gold jewelry and ornaments. The Wuhan-based company supplies its products to major retailers, while also selling them directly through its nationwide distributors.

News of the company's alleged misconduct comes just three months after coffee retail chain operator Luckin Coffee admitted that one of its employees had bloated its financial reports for 2019. The accounting fraud involved over $310 million in fake transactions. The company eventually removed the employees that were found to be responsible for the fraud, while also removing its own chief executive officer.

The scandal led a massive campaign by US lawmakers and capital market authorities aimed at increasing scrutiny of Chinese companies wishing to list in the country. The country eventually passed a controversial bill that essentially required more intense scrutiny for foreign companies, including requiring companies to submit to audits by the US Public Company Accounting Oversight Board (PCAOB).

Hostility against the Chinese firms already listed in the country led to a number of companies choosing to launch secondary listing in Hong Kong to minimize their risks. US-listed companies such as Alibaba Group, NetEase, and have already successfully launched their secondary listings, with more companies announcing secondary listing plans as well.