Sunday 14 August 2022

Chinese regulators to penalise Luckin Coffee after confirming huge accounting fraud

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MILAN – Chinese regulators will issue administrative penalties to the operating entities of Luckin Coffee Inc., two of its affiliates, and third parties assisting its illegal acts after confirming accounting fraud that has already forced the company to delist from the U.S. Nasdaq exchange.

The Ministry of Finance, which began an investigation into Luckin Coffee (China) and Luckin Coffee (Beijing) in early May, said on Friday that its investigation, now completed, found that between April 2019 and the end of the year, Xiamen-based company inflated its sales revenue by 2.12 billion yuan (about 303.58 million U.S. dollars), 41.16 percent of its disclosed revenue, via fabricated voucher transactions.

Apart from the inflated revenue, the company’s costs and expenses were also inflated by 1.21 billion yuan, while its profits were inflated by 908 million yuan during the period, the ministry said on its website.

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