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Luckin Coffee Chain Faces Punitive Actions After Financial Fraud Confirmed

July 31, 2020: 12:00 AM EST
After Chinese investigators confirmed that the Luckin Coffee chain, the country’s answer to Starbucks, had committed $300 million accounting fraud, the Ministry of Finance announced it would punish the company. The agency investigated two Luckin subsidiaries, as well as related companies and 23 financial institutions relating to the scandal, confirming that the coffee chain had fabricated sales of 2.25 billion yuan ($322 million) and revenue of 2.12 billion yuan ($304 million), and said it will move take punitive action that will be made public later. The scandal led to Washington tightening scrutiny of Chinese companies listed on American stock exchanges. Luckin Coffee’s business model was built on outselling  rivals by quickly expanding its outlets and offering deep discounts to build the customer base. [Image Credit: © www.luckincoffee.com]
Iris Ouyang, "Beijing watchdogs to punish Luckin Coffee, related firms after confirming US$300 million accounting fraud", South China Morning Post, July 31, 2020, © South China Morning Post Publishers Ltd.
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