Luckin Coffee faked 2.2B yuan in sales — China's 'Starbucks challenger' was a fraud

Luckin Coffee, founded in 2017, was China's answer to Starbucks — a fast-growing coffee chain that used heavy discounts and a mobile-first model to open thousands of stores in record time. In May 2019, less than two years after founding, it listed on the Nasdaq, a spectacular debut that made it a symbol of China's startup ambition.

In April 2020, Luckin disclosed that its chief operating officer had fabricated about 2.2 billion yuan (roughly $310 million) in retail sales in 2019, inflating reported revenue by nearly half for parts of the year. The revelation came after an anonymous short-seller's report had already raised doubts. Luckin's stock crashed, and it was delisted from the Nasdaq.

The company paid a $180 million penalty to the US Securities and Exchange Commission and restated its financials. Several executives were dismissed. But unlike many frauds, Luckin did not disappear: it restructured, kept its stores open in China, and eventually returned to profitability and growth. The case became a landmark in the scrutiny of Chinese companies listed in the US, and a cautionary tale about growth-at-all-costs.