Luckin Coffee, the once high-flying and formerly fast-rising Chinese coffee company, has agreed to pay a $180 million penalty to the US Securities and Exchange Commission (SEC) to settle charges of defrauding investors by fabricating sales to the tune of over $300 million, as revealed by Luckin’s own investigations.

The publicly-traded Chinese company has agreed to pay a $180 million penalty to the SEC to resolve fraud charges brought against the company but will neither admit nor deny the allegations.

Notably, by overstating its revenue and understating losses by a significant margin in 2019, Luckin Coffee helped lure US investors to lavish $864 million on the company, investors including the famous investment firm BlackRock. 

Then earlier this year, after battling with the short-selling firm Muddy Waters, Luckin’s own investigations revealed that its revenue for 2019 was inflated by over $300 million and its expenses inflated by over $190 million to help hide the losses.

Luckin’s internal probe brought about more probes from Chinese and US authorities, wherein the company and a handful of affiliated entities were fined a relatively paltry $9 million in China compared to $180 million just announced by the US SEC.

Once a seemingly high-flying company, Luckin sought to break the dominance of coffee chains like Starbucks in the Chinese market with the adoption of technology and e-commerce services. With a grand vision, the company convinced both private and public investors to lavish well over $1 billion on the company to fund its operations but later turned out to be a sham.

With big struggles, Luckin has sunk from having a peak market cap of nearly $13 billion now to be valued at under $1 billion.

Photo credit: Luckin Coffee/Nasdaq

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