Pat Sweet, 17 December 2020
The company, founded in 2017, was one of the few Chinese companies listed on the US NASDAQ exchange until it de-listed in July this year following the admission of a series of financial scandals. The US regulator said its investigation found Luckin had defrauded investors by materially misstating the company’s revenue, expenses, and net operating loss in an effort to falsely appear to achieve rapid growth and increased profitability and to meet the company’s earnings estimates.
The SEC alleged that, from at least April 2019 to January 2020, Luckin intentionally fabricated more than $300m in retail sales by using related parties to create false sales transactions through three separate purchasing schemes.
According to the regulator, certain Luckin employees attempted to conceal the fraud by inflating the company’s expenses by more than $190m, creating a fake operations database, and altering accounting and bank records to reflect the false sales.
In addition, the SEC said the company intentionally and materially overstated its reported revenue and expenses and materially understated its net loss in its publicly disclosed financial statements in 2019.
For example, Luckin allegedly materially overstated its reported revenue by approximately 28% for the period ending 30 June 2019, and by 45% for the period ending 30 September 2019, in its publicly disclosed financial statements.