All Rights Reserved. However, there is a problem. A step in the right direction is the re-appointment of Sean Shao as an independent director to Luckin… Because the companies need to have an auditor that is listed with the board, the SEC or the exchanges could then delist the company. Luckin Coffee Shareholder Alert: Law Firm Investigating Claims on Behalf of Luckin Investors, Shareholders Encouraged to Submit Information to Learn More 3. But this case is likely to be a catalyst for a much higher level of engagement with China's regulators. To add insult to injury, Luckin sold 4.8 million shares of stock in a secondary stock offering in January at $42 a share, raising over $380 million in new capital. Boris Johnson says he and President Macron hope to unblock the flow of trade "in the next few hours". This should be a major wake-up call for policymakers and regulators: if Chinese companies want to be listed on U.S. exchanges, they must comply with American laws and regulations for financial transparency and accountability.". Quiz of the Year, part four: Can you end 2020 on a high? China's Luckin Coffee slumps on 'fake' data news, Covid: Flights shut down as EU discusses UK virus threat, Russian agent 'tricked into detailing Navalny assassination bid', Covid-19: More than 40 countries ban UK arrivals, Essex lorry deaths: Two found guilty of killing 39 migrants, Ariana Grande announces engagement to Dalton Gomez, Brexit: Johnson resists calls to extend transition into 2021, Lockerbie bombing: Alleged bomb-maker charged on 32nd anniversary of attack, Harrods mega-spender loses Supreme Court challenge, Christmas star: Jupiter and Saturn set to align in the night sky. That’s all we know so far. Chief operating officer, Jian Liu, recorded bogus sales that were never made. China’s upstart Luckin Coffee Inc. grew at a blinding pace. It required that every domestic and foreign accounting firm that issues audit reports for companies that report to the SEC register with the board. .css-1hlxxic-PromoLink:link{color:inherit;}.css-1hlxxic-PromoLink:visited{color:#696969;}.css-1hlxxic-PromoLink:link,.css-1hlxxic-PromoLink:visited{-webkit-text-decoration:none;text-decoration:none;}.css-1hlxxic-PromoLink:link:hover,.css-1hlxxic-PromoLink:visited:hover,.css-1hlxxic-PromoLink:link:focus,.css-1hlxxic-PromoLink:visited:focus{color:#B80000;-webkit-text-decoration:underline;text-decoration:underline;}.css-1hlxxic-PromoLink:link::after,.css-1hlxxic-PromoLink:visited::after{content:'';position:absolute;top:0;right:0;bottom:0;left:0;z-index:2;}China's Luckin Coffee slumps on 'fake' data news, Coronavirus: Starbucks bans reusable cups to help tackle spread, Coronavirus: Starbucks closes 2,000 Chinese branches, UK working to unblock border 'as fast as possible'. Muddy Waters Research published a critical report on the company in January describing it as fraud and a "fundamentally broken business." A Nasdaq spokesperson declined to comment. The SEC routinely declines to comment on whether or not there's an investigation into any company, but it's hard to believe that there would not be an active investigation, particularly after this misconduct. The press releases that law firms make in pursuing suits against companies are designed to get your attention: 1. Clayton and Duhnke issued a joint statement in December 2018 noting that the board had entered into cooperative agreements with 23 foreign regulators that allow them to conduct either joint inspections or share inspection findings with regulators in those jurisdictions. In June, Rubio and several other senators introduced a bill to delist firms that are out of compliance with U.S. regulators for a period of three years, with a particular emphasis on China. The Nasdaq exchange said the shares would remain halted until Luckin had fully satisfied its request for additional information. Luckin Coffee is a Chinese Starbucks competitor that has been taking China by storm. A Division of NBCUniversal. Luckin Coffee Stock Plummets; Securities Fraud Suit Deadline Next Week 2. Over time, the PCAOB negotiated agreements with foreign counterparts that allowed them to perform audit inspections. On average, stocks that suffer significant scandals bottom out after a few months. The Sarbanes-Oxley Act of 2002 established the PCAOB. jurisdictions.". That scandal has dealt a fresh blow … Muddy Waters Research calls the debacle a "wake up call" for regulators and investors. This number does not tally with the receipts their volunteers are collecting on a daily basis. On 28 May, shares of Luckin Coffee (NASDAQ:LK) plummeted more than 20% after The Wall Street Journal released a report claiming that firms linked to the company's chairman and controlling shareholder played a central role in its accounting scandal. That decision would be made by the Nasdaq in consultation with the SEC. Luckin vowed to overtake Starbucks as China's biggest coffee chain when it launched shares in the US last year. Following Luckin Coffee scandal, Nasdaq ready to tighten rules on IPO listings Danny Crichton 7 months Chinese stocks have seen the highest highs and the lowest lows in recent weeks. Luckin's chief operating officer stands accused of fabricating 2019 sales. Read about our approach to external linking. From founding to Nasdaq IPO in 18 months, and set to displace Starbuck’s stranglehold on the Chinese coffee sector, Luckin Coffee was the newest darling of China’s tech startups before it spectacularly crashed under the weight of its latest accounting scandal. Luckin Coffee has dismissed its chief executive and chief operating officer after new evidence came to light about an accounting scandal at the company touted as China’s rival to Starbucks. While some have used recent events to call for increasing investments in China-based securities, this unfortunate but unsurprising incident highlights the tremendous risk posed by such investments. Fabricated accounting at Luckin Coffee led to a 75% decline in the Chinese company's stock on Thursday. One of China's most powerful regulators has raided the offices of Earlier this month Luckin said it had suspended its chief operating officer Jian Liu and staff reporting to him. Sign up for free newsletters and get more CNBC delivered to your inbox. China's Luckin Coffee plunges 75% on accounting probe But the company's future remains highly uncertain. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Of course, that could be litigated, and it could drag on for years. Many turned out to be frauds — so many that a movie, "The China Hustle," was made about the whole wild affair. 67. Should they be delisted from the Nasdaq? Charles Lu Zhengyao, the former billionaire co-founder of Luckin Coffee, survived an effort to oust him as chairman after directors failed to get enough votes. Luckin Coffee fired its CEO and COO as part of an internal investigation into sales fraud. Based on video footage analysis (of customers walking in and out the door), Anonymous claims that Luckin was inflating the total items sold per store (every day) by as much as 80%. The BBC is not responsible for the content of external sites. Chinese coffee chain super-brand Luckin Coffee has been in the spotlight the past week after the company revealed in an SEC filing that it has undertaken an … New coronavirus variant: What do we know? The stock, which trades on Nasdaq, dropped more than 75% on Thursday. Multinational companies are generally audited by firms in their own country. "This is again a wake-up call for U.S. policymakers, regulators, and investors about the extreme fraud risk China-based companies pose to our markets," founder Carson Block said in a statement to CNBC. © 2020 BBC. Fabricated accounting at Luckin Coffee led to a 75% decline in the Chinese company’s stock on Thursday. They have called for more cooperation from China, to no avail. The company has only been public since May. The fall of Luckin Coffee (LK) was unusually swift and sharp. Luckin Coffee confirmed on its official Weibo account that it was being inspected by the State Administration for Market Regulation (SAMR). But this is a whole other story. It sounds outrageous: The chief operating officer of Luckin Coffee, the largest domestic coffee chain in the China, was accused by his own company of fabricating much of its reported sales in 2019. Would remain halted until Luckin had fully satisfied its request for additional Information that every domestic foreign! 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