Luckin Coffee ousts Jenny Qian after US$310m sales fraud inquiry

Luckin Coffee,  said it has sacked its chief executive and chief operating officer following internal investigations into sales fraud.

Jenny Zhiya Qian, Luckin’s former CEO, and Jian Liu, its former COO, also resigned from the Chinese company’s board. The changes went into effect on Monday, CNBC reports.

The board appointed Guo Jinyi , board member and senior vice president, as the acting chief executive; Cao Wenbao as the head of store operations and customer service; and Wu Gang as the head of its strategic partnerships and supply chain management.

The coffee chain disclosed on April 2 that an internal probe found that Liu had fabricated 2019 sales by about 2.2 billion yuan (US$310 million). The chain previously said net sales for the first nine months of 2019 were 2.9 billion yuan (US$413 million). The company placed six other employees, who were either involved in or had knowledge of the fraud, on suspension or leave.

At the time, Luckin said the internal investigation was at a preliminary stage and its estimate of the fabricated sales was not verified by an independent auditor. The company’s special committee retained Kirkland & Ellis as its independent outside counsel and FTI Consulting as an independent forensic accounting expert.

The investigation is still ongoing. The company said it is cooperating with regulatory agencies in both the United States and China.

Trading in Luckin stock on the Nasdaq has been halted since April 7 for pending news. There is no time limit for how long a stock can be halted for pending news. Its shares had plummeted 83% since disclosing the fraud.

The coffee chain's stocks plummeted by more than 80 percent on April 2, the day the probe was revealed, leading to a halt in trade since April 7. There is no time limit for how long a stock can remain suspended for pending news.