Luckin Coffee, the China-based equivalent of Starbucks in the United States roiled by allegations of fabricating millions in 2019 sales, has fired its chief executive officer and reshuffled top leadership in response to the scandal.
The company announced Tuesday it fired Co-Founder and CEO Jenny Zhiya Qian and Chief Operating Officer Jian Liu after more evidence has come to light regarding the fabricated transactions. Liu had previously been suspended. Six other employees “who were involved in or had the knowledge of the fabricated transactions” have been suspended or placed on leave, the company said.
Qian and Liu also resigned from their positions on the board. Board Director and Senior Vice President Jinyi Guo will take over as acting chief executive officer amid other organizational changes.
The moves come as the company’s internal investigation—as well as investigations launched by regulatory agencies in both the United States and China—seeks to determine whether the company falsely inflated sales in 2019 by an estimated $310 million. Luckin Coffee initially denied the allegations but reversed course in April when it announced it had discovered fabricated transactions. The company has been cooperating with regulatory investigators and is seeking legal action against those involved, the company said in a statement.
In April, Nasdaq halted trading of Luckin Coffee while the investigations proceed. Shares had fallen 80 percent before Nasdaq delisted the company, according to the Wall Street Journal.
Just over two years since it was founded, Luckin Coffee had 4,500 stores in China by the end of 2019, more than the total number of Starbucks in China. Qian, who co-founded the company with Charles Lu, told investors she had a goal of opening 10,000 stores by 2021, the Wall Street Journal reported.
The apparent scam that is Luckin Coffee, however, is just one example of a much broader, disturbing problem in the United States, in which China-based firms listed on U.S. stock exchanges con U.S. investors out of billions of dollars. Another company, China-based video-streaming company iQIYI, is accused of similar manipulation. The pump-and-dump schemes are chronicled in a 2017 documentary called “The China Hustle.”