China’s Luckin Coffee has sacked two of its top bosses after new evidence came to light about an accounting scandal.
The firm said its chief executive and chief operating officer were fired after a probe into hundreds of millions of dollars worth of fake transactions.
Six other employees who were alleged to have been involved in or known about the transactions have been suspended or put on leave.
Luckin was China’s rival to the world’s biggest coffee chain, Starbucks.
Chief executive Jenny Zhiya Qian had run the company since November 2017, while Jian Liu had been in charge of its operations for the last two years.
The scandal-hit firm said it has been co-operating with regulators in the US and China, who began an investigation into the company last month.
What is Luckin Coffee?
The Chinese coffee chain, which was founded in 2017, described itself as “a pioneer of a technology-driven new retail model to provide coffee and other products of high quality, high affordability, and high convenience to customers”.
According to its own figures it had rapidly expanded to have more than 4,500 outlets by the end of last year.
The company had vowed to overtake Starbucks as China’s biggest coffee chain.
What is the scandal about?
The coffee chain’s shares slumped last month after it revealed the discovery of $310m (£250m) in fake transactions.
Luckin shocked Wall Street when it said investors could no longer rely on previous financial statements that had appeared to show rapid growth.
As late as February this year the company had strongly denied what it called “misleading and false allegations” about its finances.
Why does it matter?
The accounting scandal at Luckin is seen as clouding the prospects for other Chinese companies considering selling shares in the US.
Luckin’s Nasdaq listing had been one of China’s few successful US stock market debuts of 2019.
The firm’s shares were suspended from trade on 7 April. The Nasdaq exchange said the shares would remain halted until Luckin had fully satisfied its request for additional information.