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Luckin Coffee fires top executives over fraud scandal

Sackings come after investor flight from coffee chain

Luckin Coffee CEO Jenny Qian Zhiya, right, exchanges a high-five with barista Andrea Lattuada during the company's IPO at the Nasdaq in New York in May 2019.   © Reuters

NEW YORK -- Luckin Coffee has removed its CEO Jenny Qian Zhiya and chief operating officer Liu Jian from their posts, the company said Tuesday, following a flight of investors and company insiders over a high-profile accounting scandal.

The termination of the two C-suite executives, along with their resignation from Luckin's board, comes a little over a month after the Nasdaq-listed company admitted to fabricating $310 million in sales last year.

Liu was first held responsible in an internal probe, made public last month. But Luckin said in a filing to the U.S. Securities and Exchange Commission that its board has seen "evidence that sheds more light on the fabricated transactions" before moving to oust both.

Qian and Liu's board seats are filled by Gang Wu, a Luckin vice president, and Cao Wenbao, a 23-year veteran at McDonald's China. Jinyi Guo, a director to the board and senior vice president of Luckin, will serve as acting CEO, the company said.

Luckin "will continue to cooperate with the internal investigation and focus on growing its business under the leadership of the board and current senior management," it said.

The Chinese coffee chain, which expanded aggressively in the two and a half years since its founding, has seen investors and company insiders alike jump ship in the weeks after the fraud was revealed.

Luckin independent director Thomas Meier, who heads Swiss cough drop maker Ricola, resigned from the Chinese company's board after the scandal broke, the coffee chain said last month.

Luckin also lost its chief technology officer, He Gang, whose LinkedIn profile -- with the tagline, "Looking forward to the next opportunity" -- suggests he left the company last month. He resigned citing personal reasons, The Wall Street Journal reported.

Immediately after Luckin revealed the fraud on April 2, Lone Pine Capital, the hedge fund founded by billionaire Stephen Mandel, said in a regulatory filing that it had the reduced its stake in Luckin to zero. Lone Pine Capital held 14.5% of Luckin's American Depositary Shares as of end of 2019, according to a February filing.

Los Angeles-based Capital Group, which manages over $2 trillion and as of Jan. 31 held 9.2% of Luckin's Class A ordinary shares, in a regulatory filing Monday said it no longer owns those.

Luckin lost over 80% of its value after it revealed the internal investigation, before it halted trading on Nasdaq days later.

Ousted CEO Qian cofounded the coffee chain in late 2017 with fellow alumni of Ucar, a ride hailing platform she founded and ran, including Liu. 

Luckin chairman Charles Lu Zhengyao, who largely bankrolled the company in its initial stages, is also the largest shareholder of Ucar, which suspended trading on China's New Third Board early last month as shares plunged over the company's links to Luckin.

Acting CEO Guo is a cofounder of Luckin and served as assistant to chairman at Ucar.

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