(Yicai Global) Dec. 17 -- Luckin Coffee, the China-based chain and Starbucks contender, has agreed to pay USD180 million to the US Securities and Exchange Commission for an accounting scandal that got it booted from the Nasdaq Stock Market. 

Xiamen-based Luckin has neither admitted nor denied the charges, the SEC said in a press release yesterday.

The SEC said Luckin “intentionally” fabricated over USD300 million in retail sales from April last year to this January, and further charged that the firm “intentionally and materially overstated its reported revenue and expenses and materially understated its net loss in its publicly disclosed financial statements in 2019.”

Luckin was brought down by a January report from US short seller Muddy Waters Research accusing it of financial irregularities. The company subsequently confessed to inflating revenue last year by as much as CNY2.12 billion (USD325 million) and costs and expenses by CNY1.34 billion. Founder and Chief Executive Jenny Qian and Chief Operating Officer Liu Jian were fired in May for these misdeeds.

“Public issuers who access our markets, regardless of where they are located, must not provide false or misleading information to investors,” Stephanie Avakian, director of the SEC’s enforcement division, was quoted as saying in the market regulator’s press release.

Luckin, which has over 4,000 outlets across China, has outpaced Starbucks and Costa Coffee to become the largest java chain brand in the country. But following the scandal, it was ejected from the Nasdaq exchange on June 29, ending a 400-day listing, at an ignominious USD1.38 per share, well below its USD17 issue price. 

“While there are challenges in our ability to effectively hold foreign issuers and their officers and directors accountable to the same extent as US issuers and persons, we will continue to use all our available resources to protect investors when foreign issuers violate the federal securities laws,” Avakian said.

China’s market regulator investigated and found Luckin Coffee and four other companies violated the country’s Unfair Competition Law and were guilty of false advertising. The five firms were each fined CNY2 million (USD306,000).

Editor: Ben Armour