(Economic Watch) Ruixing Coffee's financial fraud incident attracts attention in China's official paper condemning

China News Service, Beijing, April 3 (Reporter Chen Kangliang) The well-known coffee chain company Ruixing Coffee's huge financial fraud incident is continuing to ferment, causing widespread concern.

On the 3rd, the China Securities Regulatory Commission issued an announcement saying that the Securities Regulatory Commission was highly concerned about the financial fraud incident of Ruixing Coffee and expressed strong condemnation of the company's financial fraud.

According to public information, Ruixing Coffee is registered in the Cayman Islands, issuance of securities registered by overseas regulatory agencies in China and listing on the NASDAQ stock market in the United States.

The relevant person in charge of the China Securities Regulatory Commission stated that no matter where it is listed, listed companies should strictly abide by the relevant market laws and rules, and perform their information disclosure obligations truthfully, accurately and completely. The China Securities Regulatory Commission will verify relevant situations in accordance with relevant arrangements of international securities regulatory cooperation, resolutely crack down on securities fraud, and effectively protect investors' rights and interests.

On the evening of the 2nd, Ruixing Coffee issued an announcement saying that the company had found problems when auditing the consolidated financial statements for the fiscal year ended December 31, 2019, and a special committee was set up by the board of directors to conduct internal investigations.

Preliminary investigations show that since the second quarter of 2019, the company's chief operating officer, director Liu Jian, and several employees who report to it have participated in certain violations, including inflated transactions. Sales amounted to approximately RMB 2.2 billion.

After the news was released, Ruixing Coffee's stock price suffered a severe setback last night. After the opening, the stock price quickly triggered the fusing mechanism, and subsequently triggered the fusing mechanism several times in succession. The closing price fell by more than 75%. For the so-called "Divine China" Hong Kong stock Shenzhou Car Rental, the stock price also suffered a sharp drop in the early morning on the 3rd, and then the suspension of trading was urgent, before the suspension, the decline was still more than 50%.

In response to this fraud, Ruixing Coffee also quickly responded. According to media reports, Ruixing Coffee ’s presidential office issued an internal letter last night stating that four related parties, including Liu Jian, have been suspended and the company has arranged other managers to take over the duties of the suspended staff. On the 3rd, Lu Xingyao, chairman of Ruixing Coffee, posted on social media that he should be full of energy today! Come on, buddy!

As far as consumer response is concerned, according to media reports, consumers in many places in China are now placing orders, leading to the phenomenon of "burst orders" in some stores in Ruixing Coffee. Some consumers said that many people should have seen relevant news and feared that their coupons would be invalidated and hurry up.

Three feet of freezing, not a day cold. In fact, the announcement released by Ruixing Coffee last night reminded many people of Muddy Waters's previous short report on Ruixing Coffee. At the end of January of this year, the muddy water company released a short report on social platforms, which reported that Ruixing Coffee had fraud and fraud in its operating data. On the day the research report was released, the shares of Ruixing Coffee fell more than 26% during the session. Rui Xing subsequently denied all allegations on February 3 and responded that the report's argumentation method was flawed and maliciously misleading.

In fact, Chinese investors have always been skeptical about Ruixing Coffee. One of them is that it is expanding too fast and burning money is too fierce. Looking back at the development history of Ruixing Coffee, from its establishment to the IPO (public offering of shares), Ruixing Coffee has only spent 17 months and is the fastest IPO company in the world. However, Ruixing's financial situation is not good. In 2018, the company's net loss exceeded 1.6 billion yuan, and the net loss in the first three quarters of 2019 exceeded 1.7 billion yuan.

In response to the development of the Ruixing fraud, Song Yixin, a partner of Shanghai Hanlian Law Firm, said that Ruixing Coffee may face a huge class action from investors. In the United States, a class action lawsuit is initiated. When fraud is discovered, lawyers start to collect it, then prosecute, and let the court choose the first plaintiff, which represents all victims. After the commencement of the class action lawsuit, due to the huge amount of claims and benefits to all the victims, in serious cases, the respondent company will go bankrupt as a result.

It is worth noting that according to media reports, in response to muddy water company's previous short report, a number of law firms in the United States have issued statements to remind investors that if they try to recover losses, they can contact the law firm.

For the specific parties concerned, Shen Meng, the executive director of Chanson Capital, pointed out that if Ruixing Coffee had fraudulent performance, then Ruixing Coffee would encounter a class action lawsuit, and the responsible persons of Ruixing Coffee would face criminal investigations and even have The possibility of being charged and sentenced. (Finish)