Photo shows a Luckin Coffee shop in Shanghai, east China. Photo: Xinhua

Luckin Coffee, a potential rival to Starbucks, stated on Thursday that it has reached a settlement with US securities regulators on alleged financial fraud by some of its former employees.

The company and its stores continue to operate unaffected, and Luckin Coffee will continue to cooperate with the authorities and improve its internal monitoring, the company said in a statement.

US securities regulators fined Luckin Coffee $180 million for defrauding investors over its financial performance, US securities officials announced on Wednesday.

The embattled chain intentionally fabricated more than $300 million in sales to "falsely appear to achieve rapid growth," according to a statement by the US Securities and Exchange Commission (SEC).

On April 2, Luckin Coffee announced that its chief operating officer Liu Jian and several other employees had been involved in financial fraud relating to 2.2 billion yuan ($336.9 million) in transactions, and the company had set up a special committee to conduct an internal investigation into the matter.

Several law firms in the US initiated class action lawsuits against the company for making false and misleading statements and violating US securities laws.

On June 29, Luckin Coffee halted trading on the Nasdaq exchange and ended its 400-day life as a listed company. Luckin's stock price was fixed at $1.38 per share, compared with the IPO price of $17, a drop of 90 percent.

On July 1, the company said its internal probe had been completed, with a special committee concluding that the fraud began in April 2019, that the company's 2019 net revenue had been deliberately overvalued by more than 2 billion yuan, and that operational costs and expenses were exaggerated by 1.34 billion yuan in 2019.

China's market regulator said in July that it had fined a group of 45 companies, including Luckin Coffee, a combined 61 million yuan for illicit acts linked to Luckin's falsification of financial records and misleading the public, according to Reuters.

Global Times