Photo shows a Luckin Coffee shop in Shanghai, east China. Photo: Xinhua

Chinese regulators said on Friday that they will impose administrative penalties on Luckin Coffee as well as its related firms that helped with fabricating accounts and false advertising, less than a month after the scandal-hit company was delisted from Nasdaq due to accounting fraud.

China's Ministry of Finance said in a statement on its website on Friday that it began investigations into the two main entities of Luckin on May 6, and found that the coffee start-up inflated sales by 2.25 billion yuan ($322.60 million) by using fake coupons from April 2019 to the end of 2019.

In another statement issued by the China Securities Regulatory Commission (CSRC), it said it has worked with the Ministry of Finance and the State Administration for Market Regulation to investigate domestic operation entities of Luckin and third-party companies based on relevant laws. Relevant departments also cooperated with security regulators in the US on the case.

The investigation found out that Luckin and its related entities inflated income and expenditure and engaged in false advertising, all of which violate China's accounting law and anti-fair competition law as well as China's securities law.  

The CSRC has sent an advance letter of administrative penalties to the parties involved. And if criminal activity is discovered, the public security organ will deal with it appropriately, the statement noted.

Global Times