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A federal judge is considering whether to dismiss a class action lawsuit against a Chinese coffee company following a scandal involving over $300 million in bogus revenue.
Two major pension funds— one in Sweden, another in Louisiana— filed suit against Luckin coffee after investors realized the Luckin Company’s growth was misreported. Investors allege in the complaint that Luckin, once thought to be the Starbucks of China, overstated sales by almost 100%.
Investors allege Luckin provided them with false information regarding the company’s financial statement but Luckin says there’s no way to identify specifics on the shares they hold and further say they didn’t know at the time the revenue was inaccurate.
Investors disagree and allege Luckin should’ve known and were in a rush to take the stock public.
Luckin allegedly inflated its sales in 2019 in a lead up to being listed on the Nasdaq stock exchange, according to a CNBC report.
In April 2019, a month before Luckin’s initial public offering, the company disclosed they were investigating its chief operating officer and said investors should not rely on most of 2019’s financial statements, investors alleged in their initial complaint.
Officials with China’s State Administration for Market Regulation found emails from Luckin’s chairman directing the alleged fraud, according to the class action lawsuit.
The announcement caused Luckin stock to drop 75% from $26.60 a share to $6.40 in one day on April 1, 2019.
Luckin settled with the Securities and Exchange Commission in December, agreeing to a $180 million fine, Investors said in their class action lawsuit.
Although Luckin fired its CEO in May, the company was delisted from selling shares on the Nasdaq Stock Market in June, investors said.
Four class action lawsuits claiming security fraud arose from the developments, according to Law360, and were eventually merged together into this current case.
Luckin Coffee was founded in 2017 and within a year and half opened 2,370 stores in 28 Chinese cities.
Have you invested in Luckin Coffee or have a retirement account that invests in Luckin Coffee? What do you think of this class action lawsuit? Let us know in the comments below.
The Luckin Coffee Class Action Lawsuit is In re Luckin Coffee Inc. Securities Litigation, Case No. 1:20-cv-01293-JPC in the U.S. District Court for the Southern District of New York.
Counsel representing the plaintiffs in this class action lawsuit are Salvatore J. Graziano, John Rizio-Hamilton, Jai Chandrasekhar, Kate W. Aufses of Bernstein Litowitz Berger & Grossmann LLP; Sharan Nirmul, Gregory M. Castaldo, Richard A. Russo, Jr., Lisa M. Port and Nathan A. Hasiuk of Kessler Topaz Meltzer & Check, LLP.
Read About More Class Action Lawsuits & Class Action Settlements:
4 thoughts onJudge Considers Motions In ‘Chinese Starbucks’ Investor Class Action
Lost 27,000. Need my money
lost $50,000
I paid motley fool $100 to tell me to buy lukin coffee then I lost 800$
I lost $1,000 need my money back