Months after being delisted from Nasdaq for inflating sales fraudulently, China-based Luckin Coffee has filed for bankruptcy in the United States after the company admitted that sales worth millions of dollars had been fabricated.
CNN reported that the company, in a statement on Friday, said the move will help it financially restructure itself and strengthen its balance sheet. That type of filing shelters the US assets of foreign compes undergoing restructuring proceedings in their home country.
The company said that bankruptcy won't "materially impact" Luckin's day-to-day operations and its roughly 3,600 cafes will remain open.
"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 -- who 'had engaged in certain misconduct, including fabricating certain transactions' -- beginning in 2019 amounting to about USD 310 million," CNN reported.
The company's stock was delisted on the Nasdaq exchange in June after it was discovered that the company fraudulently inflated sales, plunged more than 50 per cent to about USD 1.40.
As per media reports, the US Securities and Exchange Commission fined the company USD 180 million in December last year, after it found that the company intentionally fabricated more than USD 300 million in sales from April 2019 through January 2020. The company has never officially admitted or denied the SEC's allegations.
CNN reported that in early April, Luckin revealed it had uncovered fabricated transactions as part of an internal investigation into accounting regularities. Later, shares of the company plunged more than 75 per cent before being halted on April 6.
( With inputs from ANI )
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