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China issues $9m fines over Luckin Coffee sales fraud

China’s financial regulator issues combined penalty to 45 companies implicated in 2.3bn yuan ($337.1m) fabricated sales unearthed in April 2020

Luckin Coffee has said it will "further improve our operations according to related laws and regulations" following the ruling



Luckin Coffee has been given a slap-on-the wrist fine by Chinese regulators following revelations in April 2020 it fabricated sales amounting to $337.1bn during 2019. A subsequent internal investigation by the 4,500-store coffee chain confirmed financial records and operational data had been falsified, resulting in the sacking of senior management, including CEO Jenny Zhiya Qian and COO Jian Liu, and the firm’s suspension from the Nasdaq in New York.
 
A total of 45 companies, including Beijing Auto World Consulting Service and Beijing Shenzhou Youtong Technology Development, as well as two Luckin Coffee entities, were found to have given "substantive assistance for the false advertising” that broke Chinese fair competition rules.
 
The group has now been fined a total of 61m yuan ($9m) by China's State Administration for Market Regulation after being implicated in the scandal, which has rocked the rapidly expanding e-commerce café concept.
 
“We have carried out an overall rectification on the related issues… We will further improve our operations according to related laws and regulations,” said Luckin Coffee on its Weibo account acknowledging the ruling.
 
Since launching in late 2017, Luckin Coffee has expanded at breakneck speed in China, opening more than 4,500 sites in a bid to challenge the dominance of market leader, Starbucks. However, the coffee chain’s future is now deeply uncertain following the revelations, which have rocked investor confidence and continue to tarnish the brand’s reputation.

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