Luckin Coffee files for bankruptcy in the US
Posted February 5, 2021 11:26 a.m. EST
CNN — Luckin Coffee, once hailed as China's homegrown rival to Starbucks, has filed for bankruptcy in the United States less than a year the company admitted that millions of dollars in sales had been fabricated.
In a statement Friday explaining its Chapter 15 filing, Luckin said the move will help it financially restructure itself and strengthen its balance sheet. That type of filing shelters the US assets of foreign companies undergoing restructuring proceedings in their home country.
Bankruptcy won't "materially impact" Luckin's day-to-day operations and its roughly 3,600 cafes will remain open, according to a release.
The filing caps off a rough year for the company. Last April, it was revealed that Luckin's former chief operating officer Jian Liu and several of his direct reports "had engaged in certain misconduct, including fabricating certain transactions" beginning in 2019 amounting to about $310 million.
Lu and CEO Jenny Zhiya Qian were both fired May 2020. Months later, its stock was delisted on the Nasdaq exchange. In December, the Securities and Exchange Commission slapped the company with a $180 million penalty to settle fraud charges.
Luckin went public in 2019 and surged because of what appeared to be strong sales growth. Investors lapped up the stock, betting that the chain would become a legitimate rival to Starbucks, which generates a big chunk of its revenue from Chinese consumers.