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Luckin’s CEO Jenny Zhiya Qian and COO Jian Liu formally resigned from the company’s board of directors May 11, a press release issued Tuesday revealed
The pair were responsible for “fabricated transactions” that amounted to $310 million, which were discovered in the company’s financial statements for the fiscal year of 2019. Luckin’s stock immediately plummeted since disclosing the fraud in April after an investigation and regulatory filing.
Six other employees who were involved or had knowledge of the fabricated transactions are on suspension or leave, according to Luckin.
The fraud investigation is ongoing.
”The Company has been cooperating with and responding to inquiries from regulatory agencies in both the United States and China,” Luckin’s press release states. “The Company will continue to cooperate with the Internal Investigation and focus on growing its business under the leadership of the Board and current senior management.”
Board member Jinyi Guo has been appointed to senior vice president by Luckin’s board of directors, and he is now the acting chief executive officer of the company.
Additional board appointments include Wenbao Cao and Gang Wu, who join as directors.
Cao has served as Luckin’s senior vice president and has been in charge of store operations and customer service since June 2018. Prior to his work at Luckin, he served in various positions at McDonald’s China, which afforded him over 23 years of experience. His previous titles include vice president and north regional manager.
Wu, on the other hand, has served as Luckin’s vice president and has been in charge of strategic partnerships since March 2019 and supply chain management since April 2020. Before he began working in the food and beverage industry, Wu held senior management positions at China United Airlines, China Eastern Airlines and Air China. He has over 26 years of experience.
Luckin was founded in October 2017 and has more than 4,500 locations in China today, which surpasses its competitor Starbucks. The brand offers cheaper pricing and smaller stores that are meant for grab-and-go convenience. It is one of the few Chinese-owned companies to successfully IPO in the U.S. The company went public last May.
Despite the success, American hedge fund Muddy Waters raised allegations of fraud within the foreign coffee company in January, but Luckin denied the claims at the time.
Luckin’s special committee retained American law firm Kirkland & Ellis as its independent outside counsel. Additionally, Washington, D.C.-based business advisory firm FTI Consulting will serve as an independent forensic accounting expert.