An internal investigation into alleged fraud at Luckin Coffee Inc. has led to the firing of several top executives at the Beijing, China-based java giant, the company announced on Tuesday (May 12).
The probe was launched last month after Luckin’s board of directors was notified of potentially fabricated transactions that inflated estimated revenues by more than $300 million.
As a result of the inquiry, Luckin terminated CEO Jenny Zhiya Qian and COO Jian Liu and stripped them of their roles on the board. In addition, the company has placed six other employees on suspension or leave due to involvement in or knowledge of the fraud. The company did not provide any additional information about the terminated or suspended employees.
Luckin began its inquiry last month about the alleged fraud by Liu, which is believed to have begun in the second quarter of last year, PYMNTS reported. The company said it is cooperating with regulatory agencies in the U.S. and China.
In a filing with the Securities Exchange Commission (SEC), the board said the agency should not rely on the company’s recent financial statements, which are believed to be inaccurate.
A special committee at Luckin hired Chicago-based law firm Kirkland & Ellis as counsel and FTI Consulting of Washington, D.C. as the forensic accounting expert, the SEC filing said.
The panel found that starting in the second quarter of 2019, Liu – who also served as a company director – and several other employees had engaged in misconduct, including the fabrication of certain transactions.
Luckin, often referred to as the Starbucks of China, was the nation’s fastest-growing coffee company.
The board has appointed Jinyi Guo, a director to the board and a senior vice president of Luckin, as acting CEO. Wenbao Cao and Gang Wu were named as directors to the board.
Cao has served as senior vice president in charge of store operations and customer service since 2018. Before joining Luckin, he had more than 23 years of experience at McDonald’s China and served in various positions, including vice president and North regional manager.
Gang Wu has served as vice president in charge of strategic partnerships since last year and has also been in charge of supply chain management since April. Before joining the company, Wu had more than 26 years of experience in the airline industry, including senior management positions at China United Airlines, China Eastern Airlines and Air China.