Luckin Coffee Agrees to Settle Accounting Fraud Claims For $175M
The accord also covers Luckin officials, and underwriters of the Xiamen, China-based company’s $645 million initial public offering in 2019 and a later offering of American depositary shares.
U.S. District Judge John Cronan in Manhattan approved the preliminary settlement on Tuesday, and scheduled a Jan. 31, 2022 hearing to consider final approval. The settlement also requires approval by a Cayman Islands court.
Luckin denied wrongdoing. Its U.S.-based lawyers did not immediately respond to requests for comment.
Founded in 2017, Luckin ended March with about 5,000 stores.
Shareholders sued Luckin in February 2020, two weeks after short-seller Muddy Waters Research accused it of inflating revenue.
Two months later, Luckin’s share price sank 81% after the company said an internal probe found that its chief operating officer and other staff fabricated about $310 million of sales in 2019, or about 40% of annual sales projected by analysts.
Luckin agreed last December to pay a $180 million fine to settle U.S. Securities and Exchange Commission accounting fraud https://www.reuters.com/article/us-usa-sec-luckincoffee/luckin-coffee-to-pay-180-million-penalty-to-settle-accounting-fraud-charges-u-s-sec-idUKKBN28Q34P civil charges.
The SEC said Luckin raised more than $864 million from equity and debt investors while the fraud was taking place.
Shareholders in the class action are led by Swedish pension fund Sjunde AP-Fonden and the Louisiana Sheriffs’ Pension & Relief Fund.
Their lawyers, led by Kessler Topaz Meltzer & Check and Bernstein Litowitz Berger & Grossmann, may seek fees of up to 25% of the settlement fund.