Chinese coffee chainoperator Luckin Coffee has agreed to pay $180 million to the U.S. Securities and Exchange Commission to settle allegations of it engaging in scam accounting.
Luckin Coffee - often referred to as China's Starbucks - was accused by the Securities and Exchange Commission of faking its earnings reports and fabricating more than $311 million of retail sales. The company was also accused of understating its net losses and inflating its expenses by more than $190 million.
The settlement is the second-largest penalty imposed on a U.S.-listed Chinese company behind the $250 million penalty slapped by the Securities and Exchange Commission on Puda Coal in 2015.
Luckin Coffee said that the settlement is not an admission of any wrongdoing on its part. The settlement is still subject to approval by the court.
The Securities and Exchange Commission's director of its Division of Enforcement, Stephanie Avakian, said in a statement that the settlement should serve as an example to other foreign issuers. She said that the agency will use all of its available resources "to protect investors when foreign issuers violate the federal securities laws."
"Public issuers who access our markets, regardless of where they are located, must not provide false or misleading information to investors," Avakian said.
After Luckin Coffee admitted to tampering with its financial reports, the Securities and Exchange Commission launched its own investigation into the matter. The scandal eventually led to the delisting of the company from the NASDAQ. Luckin Coffee also changed its board of directors and fired all employees involved in the faked reports.
Luckin Coffee's current chairperson and chief executive officer, Guo Jinyi, said in a statement that the settlement is part of the company's "remediation efforts." Guo said that the company hopes that it can now continue with executing its business strategy with the issue now resolved.
The company's board of directors and management are committed to a system of strong internal financial controls, and adhering to best practices for compliance and corporate governance," Guo said.
Luckin Coffee made its U.S. debut in May 2019. The company raised more than $561 million during its initial public offering. The company's stock has since lost more than 90% of its value following the accounting scandal.
