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Luckin Coffee fires both CEO and COO amid new evidence in fraud probe

Luckin Coffee

BEIJING, China – Luckin Coffee has fired fired both its CEO and COO amid an ongoing investigation into fabricated transactions. Jenny Zhiya Qian was terminated on Monday, along with chief operating officer Jian Lu – the executive whom the company said last month was the architect of the fraud – according to a filing Luckin (LK) made with the Securities and Exchange Commission Tuesday morning.

Luckin disclosed on April 2 that it had suspended Liu after discovering he and several of his direct reports “had engaged in certain misconduct, including fabricating certain transactions.” These amounted to about 2.2 billion yuan (approximately $310 million) from the second quarter to the fourth quarter of last year.

Jinyi Guo, a senior vice president and board director, has been named acting CEO.

The board of directors made the decision after a special committee conducting the probe brought “evidence that sheds more light on the fabricated transactions,” it said.

Both also resigned from the board.

Here is the text of the statement issued by Luckin Coffee on Tuesday

Luckin Coffee Inc. yesterday announced changes to its Board of Directors (“Board”) and senior management, effective May 11, 2020. During its ongoing internal investigation (the “Internal Investigation”), the Special Committee of the Board (the “Special Committee”) has brought to the attention of the Board evidence that sheds more light on the fabricated transactions described in the press release issued by the Company on April 2, 2020.

After considering such information, the Board has terminated Ms. Jenny Zhiya Qian and Mr. Jian Liu from the positions of the Chief Executive Officer and the Chief Operating Officer, respectively.

The Board also demanded and received from Ms. Qian and Mr. Liu their resignations from the Board. In addition to Ms. Qian and Mr. Liu, since the beginning of the Internal Investigation, the Company has placed six other employees, who were involved in or had the knowledge of the fabricated transactions, on suspension or leave.

The Board has appointed Mr. Jinyi Guo, a director to the Board and a Senior Vice President of the Company, as the Acting Chief Executive Officer of the Company. The Board also announced the appointment of Mr. Wenbao Cao and Mr. Gang Wu as directors to the Board.

Following the changes to the Board, the Compensation Committee of the Board currently consists of Mr. Sean Shao, Mr. Erhai Liu and Mr. Jinyi Guo, with Mr. Sean Shao serving as its chairman; the Nominating and Corporate Governance Committee of the Board currently consists of Mr. Wai Yuen Chong, Mr. David Hui Li and Mr. Jinyi Guo, with Mr. Wai Yuen Chong serving as its chairman; the composition of Audit Committee of the Board remains unchanged.

Mr. Wenbao Cao has served as Senior Vice President of the Company in charge of store operations and customer service since June 2018. Before joining the Company, Mr. Cao had over 23 years of experience at McDonald’s China and served in various positions, including vice president and North regional manager at McDonald’s China.

Mr. Gang Wu has served as Vice President of the Company in charge of strategic partnerships since March 2019, and has also been in charge of supply chain management since April 2020. Before joining the Company, Mr. Wu had over 26 years of experience in airline industry, including holding senior management positions at China United Airlines, China Eastern Airlines and Air China.

Following issuing the press release by the Company on April 2, 2020, the Company has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China. The Company will continue to cooperate with the Internal Investigation and focus on growing its business under the leadership of the Board and current senior management.