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Luckin Coffee Director Resigns 2 Months After Appointment to Audit Committee

By Rich Duprey – Jun 19, 2020 at 9:34AM

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The Chinese coffee chain is being investigated for a massive accounting fraud scandal.

Scandal-scarred Chinese coffee shop Luckin Coffee (LKNC.Y 0.55%) announced today the independent director it appointed at the end of March and assigned to the company's audit committee has resigned, effective immediately.

The coffee shop, which had seemingly been on a massive growth trajectory, has since been accused of inflating its sales numbers in a major accounting scandal, reportedly faking as much as two-thirds of all sales it made.

Spilled coffee cup

Image source: Getty Images.

A bitter brew

Tianruo Pu, an accounting executive who previously served as CFO of two international companies, online recruitment platform Zhaopin and telecom infrastructure provider UTStarcom, was appointed to Luckin's board as an independent director at the end of March as accusations of accounting fraud swirled around the company.

Pu was subsequently appointed to the audit committee of the coffee chain as well as a special committee to oversee an internal investigation of the allegations against the company. Logistics executive Wai Yuen Chong was appointed to the board and the audit and special committees at the same time.

The internal investigation found its COO and other employees fabricated some $311 million in sales, which has resulted in the SEC and China's State Administration for Market Regulation launching their own investigations into the company.

The statement from Luckin Coffee said Pu's resignation was for "personal reasons" and the company will seek a replacement. Wai Yuen Chong is continuing in his role on the audit and special committees along with Luckin chairman Sean Shao.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. The Motley Fool has a disclosure policy.

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Luckin Coffee Inc. Stock Quote
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