Chinese coffee chain appoints acting CEO amid on-going internal investigation that revealed $310m sales fraud in April 2020
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A Luckin Coffee store in Hubin District, Sanmenxtia, China
Luckin Coffee has dismissed its CEO, Jenny Zhiya Qian, and COO, Jian Liu, as an internal investigation continues to probe
fabricated sales worth $310m unearthed in April.
Director to the Board and Senior Vice President of the company, Jinyi Guo, has been appointed acting CEO, while another six employees thought to be involved or possessing knowledge of the fraudulent transactions have been suspended or placed on leave, the company has said.
Shares in Luckin Coffee plummeted more than 80% following revelations investors could no longer rely on its 2019 financial statements and are currently suspended.
Former CEO Jenny Zhiya Qian had led Luckin since late-2017, while former COO Jian Liu joined in 2018. By removing those at the helm of the company during the scandal, Luckin will be seeking to stabilise its operations during an already delicate period as Chinese hospitality businesses
begin to reopen following months of coronavirus shutdown.
The delivery and value-focused coffee chain has
expanded at break-neck speed since launching in late-2017, opening more than 4,500 sites and taking on market leader Starbucks for dominance in the vast east-Asian market. News of the scandal has, however, raised serious questions about the veracity of Luckin’s operation, with many investors and analysts now questioning its future viability.
Allegations Luckin Coffee had posted fraudulent operational data first arose in February 2020 from US analyst firm, Muddy Waters Research, which Luckin denied. The digital and delivery-focused coffee chain is also currently the focus of a class-action lawsuit brought on behalf of US investors alleging the false disclosure of financial performance metrics.