Luckin Coffee, which was embroiled in financial fraud controversy, agreed to pay $180 million in fines in a settlement with the SEC, according to an announcement on the SEC's website.
The SEC has filed a proposed settlement with the US District Court for the Southern District of New York today, and the settlement is pending court approval.
"This settlement with the SEC reflects our cooperation and remediation efforts, and enables the company to continue with the execution of its business strategy," Guo Jinyi, Chairman and Chief Executive Officer of Luckin Coffee said in a statement.
"The company's Board of Directors and management are committed to a system of strong internal financial controls, and adhering to best practices for compliance and corporate governance," Guo added.
Chinese regulator fines 45 companies about $9 million over Luckin Coffee financial fraud
Luckin Coffee neither admitted nor denied the regulators' allegations in the settlement.
Luckin Coffee said that the company and its stores are currently operating in a stable and normal manner and that Luckin Coffee will continue to cooperate with regulation and consider compliance as a top priority.
"At the same time, the company's management and all employees will continue to maintain the company's stable operations and continue to provide consumers with high-quality, cost-effective, and convenient products and services."
In February 2020, the anonymous agency submitted information to short-seller Muddy Waters that alleged Luckin Coffee was involved in financial fraud.
The agency sent 92 full-time and 1,418 part-time investigators to collect evidence on-site at more than 900 stores nationwide in order to prove that Luckin Coffee was falsifying.
They collected 25,843 purchase tickets, numerous internal WeChat records, business information of associates and companies, and recorded 11,260 hours of store video to reach the judgment that Luckin Coffee was falsifying.
Luckin Coffee was delisted on June 29, 2020, due to its inability to file its annual report.
In July 2020, Luckin Coffee announced the findings that Luckin Coffee's financial transactions were fabricated beginning in April 2019. As a result, Luckin Coffee's net income increased by approximately $2.12 billion in 2019, with $250 million in the second quarter, $700 million in the third quarter, and $1.17 billion in the fourth quarter.
"The settlement with Luckin is designed to help ensure that harmed investors have the best available opportunity to receive relief," said Carolyn M. Welshhans, Associate Director of the SEC's Division of Enforcement.
Luckin Coffee went up 1.63% on the OTC market on Wednesday.
