Source: HangzhouTube, Global Times
Chinese government officials on Wednesday expressed a stern attitude toward the legal handling of Luckin Coffee, China's Starbucks rival, which has been caught in scandal since it was recently discovered to have fabricated financial and operating numbers.
"The China Banking and Insurance Regulatory Commission (CBIRC) firmly supports and will actively cooperate with regulators to severely punish the company according to the law," said Cao Yu, vice president of the CBIRC, at a press conference on Wednesday.
During the conference, Cao described Luckin Coffee's scandal as being of a "vile nature" and "teaching a profound lesson."
"The CBIRC has zero tolerance for financial fraud activitiesIt's the legal responsibility of all Chinese enterprises to report their financial statuses genuinely and completely," Cao stressed.
The Xiamen-based Chinese coffee maker's staggering revelation that about 40% of its sales since the second quarter of 2019 had been fabricated has led to billions of dollars wiped from its market value.
Cao revealed that Luckin had taken out some bank loans, though not of a large amount, and the CBIRC has urged relevant banks to strengthen risk monitoring and after-loan management.
He also noted that Luckin had taken out liability insurance before listing. Some insurance companies have already received claim applications from the company, but uncertainties exist as investigations are still underway.
Liu An, a Chinese securities market lawyer, said that Luckin is likely to receive sky-high fines from US securities regulators and might be forced to delist from Nasdaq.
The CBIRC's determination to punish Luckin is a reflection of China's determination to strengthen its management of domestic financial markets.
Cao disclosed that the CBIRC launched special rectification programs last year targeting shareholder violations and connected transactions, clearing around 1,400 illegal shareholders and investigating and prosecuting more than 3,000 violation cases.
He also noted that China has urged illegal shareholders to transfer 3.34 billion shares and imposed fines totaling 51.65 million yuan ($7.29 million) on 74 institutions since the CBIRC began carrying out special investigations into medium and small financial institutions in rural areas in 2018.
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