Tencent technology news according to media reports, lucky coffee filed for bankruptcy protection in New York. In response, lucky coffee said that it is negotiating with its stakeholders on the company’s financial debt restructuring. All of the company’s stores in China are still open and serve customers, and are not expected to have a significant impact on day-to-day operations.
Prior to that, on December 17, 2020, lucky coffee official micro issued a statement saying that it had reached a settlement with the securities and Exchange Commission (SEC) on the suspected financial fraud of some former employees. At present, the company and stores operate stably and normally. Lucky coffee will continue to cooperate with the supervision and regard the compliance work as the top priority.
At the same time, lucky coffee also said that the company’s management and staff will continue to maintain the stable operation of the company, and continue to provide consumers with high-quality, cost-effective and convenient products and services.
Earlier in the day, the securities and Exchange Commission announced that lucky coffee had agreed to pay $180 million to settle its accounting fraud charges.
According to the SEC, from April 2019 to January 2020, lucky forged more than $300 million in sales through fraudulent transactions with related parties. In the settlement, lucky coffee neither admitted nor denied the accusations made by US regulators.
On April 2, 2020, lucky coffee announced that its self-examination found that Liu Jian, the chief operating officer of the company, made a financial fraud, involving about 2.2 billion yuan of transaction volume. The board of directors of the company set up a special committee to conduct an internal investigation. In addition, a number of U.S. law firms have launched class action suits against lucky coffee, accusing it of making false and misleading statements, violating U.S. Securities Law.
On June 29, 2020, lucky coffee officially stopped trading on the NASDAQ Exchange, entered the delisting process, and ended its 400 day listing journey. Lucky coffee’s share price was fixed at $1.38/share, which was 90% lower than the issue price of $17 when it was listed.
On July 1, 2020, lucky coffee announced on its official website that the company’s internal investigation was basically completed. The special committee of the board of directors found that financial fraud began in April 2019. The company’s net revenue in 2019 was about 2.12 billion yuan, and its costs and expenses were exaggerated by 1.34 billion yuan in 2019.
On July 31, 2020, the government officially disclosed the progress of the investigation into the financial fraud of lucky coffee. According to the accounting law of the people’s Republic of China, the Ministry of finance has organized forces to inspect the quality of accounting information since the establishment of Ruixing coffee (China) Co., Ltd. and Ruixing coffee (Beijing) Co., Ltd., the two main operating entities of Ruixing coffee company, since May 6, and extended inspection on 23 affiliated enterprises and financial institutions, according to the Ministry of finance’s website. So far, the inspection has been basically completed.
The inspection found that from April 2019 to the end of 2019, lucky coffee company increased transaction volume by 2.246 billion yuan (RMB, the same below) through fictitious commodity bonds business, falsely increased revenue by 2.119 billion yuan (accounting for 41.16% of the disclosed revenue of 5.15 billion yuan), falsely increased cost by 1.211 billion yuan, falsely increased profit by 908 million yuan.
On October 12, 2020, the State Administration of Market Supervision announced that Ruixing coffee (China) Co., Ltd. and Ruixing coffee (Beijing) will be fined 2 million yuan.
Timeline of lucky coffee fraud event:
January 31, 2020
Hunshui, a well-known shorting company, said publicly on social media that it had received an 89 page anonymous investigation report alleging that lucky coffee’s financial and operating data were fake.
February 3, 2020
In response to shorting, Ruixing said that the so-called evidence contained in the report had no conclusive factual basis, and the accusations in the report were based on groundless speculation and malicious interpretation of the incident.
April 2, 2020
Lucky coffee announced that during the second quarter to the fourth quarter of 2019, the company falsely increased the trading volume by RMB 2.2 billion, and the related fees and expenses also falsely increased accordingly.
Morning of April 5, 2020
Lu Zhengyao, chairman of lucky coffee, apologized in the circle of wechat friends, “I personally blame myself very much. No matter what the final findings of the independent commission are, I will take responsibility. ”
Afternoon of April 5, 2020
Ruixing apologized through the official social platform: for any person involved, the company will reserve the right to take legal measures, will not cover up, will not tolerate! The company will also deeply reflect on confession and strengthen internal control and compliance.
April 7, 2020
Before the opening of us time on April 7, lucky coffee announced its suspension, waiting for more information to be disclosed
April 23, 2020
According to media sources, shortly after lucky self disclosed financial fraud on April 2, the US Securities and Exchange Commission (SEC) has sent a letter to the China Securities Regulatory Commission (CSRC) to communicate with the CSRC on the cooperation between the two sides in the thorough investigation of lucky coffee.
April 23, 2020
Cao Yu, vice chairman of the China Banking and Insurance Regulatory Commission, also said publicly that the Ruixing incident was of a bad nature and taught a profound lesson. The China Banking and Insurance Regulatory Commission will firmly support it and actively cooperate with the competent authorities to severely punish it in accordance with the law, stressing that the China banking and Insurance Regulatory Commission will always have zero tolerance for financial fraud.
April 27, 2020
On April 27, Tencent News “first line” learned from relevant people that China Securities Regulatory Commission has sent an investigation team to Ruixing coffee, which is deeply involved in the financial fraud scandal, for many days. In addition, a number of auditors are auditing the financial situation of lucky.
April 29, 2020
According to Dow Jones, people familiar with the matter said that the US Securities and Exchange Commission is investigating the 2.2 billion yuan earnings fraud disclosed by lucky coffee.
May 12, 2020
On May 12, lucky coffee announced the adjustment of its board of directors and senior management, and CEO Qian Zhiya and coo Liu Jian were suspended. The latter was also the “backer” of lucky’s false trading incident in April. Meanwhile, lucky coffee announced co-founder Guo Jinyi as acting CEO, and suspended or resigned six employees.
May 19, 2020
Lucky announced that the company received a written notice from the listing qualification Department of Nasdaq stock market Co., Ltd. on May 15, 2020. According to the notice, the listing Qualification Committee has decided to delist the company’s securities from NASDAQ.
June 6, 2020
According to Caixin, a person close to the Supervision said that the relevant departments have obtained the mandatory e-mail from lucky Chairman Lu Zhengyao about the company’s financial fraud. Lu Zhengyao will be prosecuted and is likely to face criminal prosecution.
June 11, 2020
Ping An of China said on the interactive platform that lucky coffee insured the liability insurance of directors, supervisors and senior managers, and Ping An Property Insurance and more than 10 domestic insurance companies participated in the underwriting in the form of CO insurance.
June 14, 2020
The reporter of China first finance and economics learned from people close to the regulatory level that the on-site inspection of the financial fraud case of lucky coffee by the Ministry of finance has ended. At present, the relevant report is waiting for the approval of a higher level.
June 16, 2020
Several banks are facing a shortage of $300 million in cash for lucky coffee margin loans, according to Bloomberg. Lucky coffee borrowers include Credit Suisse and Morgan Stanley.
June 20, 2020
Lucky coffee (LK) issued a notice to hold a special general meeting of shareholders. The extraordinary general meeting of shareholders will be held on July 5, 2020. According to the notice, the matters to be discussed at this shareholders’ meeting include the removal of the director appointment of Chairman Lu Zhengyao, the removal of the director appointment of Li Hui and Liu Erhai, and the removal of the independent director Sean Shao.
June 26, 2020
Lucky coffee announced that it had withdrawn its request for a hearing. Nasdaq’s office of general counsel has informed lucky coffee that its shares will be suspended at the opening of trading on June 29.
July 3, 2020
Lucky coffee filed an announcement with the securities and Exchange Commission, saying the board’s proposal to remove Lu Zhengyao had not been approved and that Lu Zhengyao would continue to serve as chairman.
July 5, 2020
The results of the special shareholders’ meeting of lucky coffee (LK) held at 3:00 p.m. on July 5 showed that the appointment of directors Lu Zhengyao, Li Hui, Liu Erhai and Sean Shao were removed.
July 6, 2020
Foreign media revealed that lucky coffee’s internal investigation concluded that Lu Zhengyao knew or should have known about the false transaction. The report also pointed out that Lu Zhengyao did not fully cooperate with the investigation.
July 8, 2020
According to media reports, KPMG and other representatives of the three companies submitted a joint letter opposing the way of holding the lucky special shareholders’ meeting and the way of counting votes, accusing Lu Zhengyao of manipulating the voting.
July 10, 2020
The investigation of lucky coffee fraud ended, and the report showed that Liu Erhai and Li Hui were not aware of it.
July 14, 2020
Lucky coffee announced the changes of the board of directors: the board of directors completed the reshuffle, Lu Zhengyao was officially out, and Guo Jinyi was the new chairman and CEO of the board
July 14, 2020
Lu Zhengyao shares by the court liquidation! Will lose control of lucky, KPMG will become the company’s largest shareholder.
July 31, 2020
The Ministry of finance has completed the quality inspection of accounting information of domestic operation entities of lucky coffee company. The inspection found that from April 2019 to the end of 2019, lucky coffee company falsely increased revenue by 2.119 billion yuan.
October 12, 2020
The State Administration of Market Supervision announced that Ruixing coffee (China) Co., Ltd. and Ruixing coffee (Beijing) will be fined 2 million yuan.
December 16, 2020
The securities and Exchange Commission announced that lucky coffee agreed to pay $180 million to settle its accounting fraud charges.
December 17, 2020
Lucky coffee released a statement through its microblog that lucky coffee and the securities and Exchange Commission (SEC) have reached a settlement over the suspected financial fraud of some former employees. At present, the company and stores operate stably and normally.
February 5, 2021
Market news: Lucky coffee filed for bankruptcy protection in New York