(Economic Observer) Luckin Coffee's $180 million counterfeiting case reached a settlement

　　China News Agency, Beijing, December 17 (Reporter Wang Qingkai) The Ruixing Coffee fraud case has new developments.

In the early morning of the 17th, on Wednesday, local time, the US Securities and Exchange Commission (SEC) stated that Ruixing Coffee agreed to pay 180 million US dollars (nearly 1.2 billion yuan) to reach a settlement in response to the allegations of fraud.

Data map: Luckin Coffee Shop.

Photo by Yin Liqin

　　In a subsequent official statement, Luckin Coffee stated that the company has reached a settlement with the SEC on the investigation of fraudulent transactions by certain former executives and employees.

　　In the first half of this year, Luckin Coffee blew up the company's financial fraud, involving sales of approximately 2.2 billion yuan.

Then Ruixing Coffee fell into a vortex.

On June 29, Luckin Coffee was delisted from the US stock market, and immediately followed by investigation penalties from Chinese regulators.

　　The profit-seeking nature of capital determines that once there is an appropriate profit, it will be bold.

This is clearly reflected in the "Luckin Coffee Fraud Case".

　　Chinese official investigations show that in order to pursue profits, Luckin Coffee has recruited 43 "accomplices" and carried out a systematic fraud project that lasted more than a year.

Fictional hundreds of millions of orders, inflated revenue, fake transactions, and even forged bank records.

　　The Administrative Penalty Decision of the “Luckin Coffee Counterfeiting Case” issued by the State Administration for Market Regulation of China on October 12 shows that Ruixing Coffee (China) Co., Ltd. and Ruixing Coffee (Beijing) Co., Ltd. are in order to obtain competitive advantages and trading opportunities. False boosted Luckin Coffee's key marketing indicators such as sales revenue, costs, and profit margins of related products in 2019.

Under the coordination of other companies, a total of 123 million orders for fake coffee cards and coupons were made.

　　Prior to this, the State Administration for Market Regulation issued the administrative penalty decision of the five main participating companies in the "Luckin Coffee Fraud Case", and imposed an administrative fine of 2 million yuan on each of the five companies.

　　Such systematic, large-scale, long-term business and financial fraud can be accomplished by Luckin itself?

　　Obviously not.

When investigating the case, the State Administration for Market Regulation also found that more than 40 companies including Beijing Auto World Consulting Service Co., Ltd. and Beijing Shenzhou Youtong Technology Development Co., Ltd. had conspired with Ruixing to commit fraud.

　　The reporter combed these companies and found that they were more or less related to Lu Zhengyao, the former chairman of Ruixing Coffee, and the Shenzhou Department.

Lu Zhengyao was also punished for this.

　　Industry and commerce information shows that the notified Beijing Shenzhou Youtong Technology Development Co., Ltd. and Beijing Chexing World Consulting Service Co., Ltd. are all related companies of China.

Lu Zhengyao is the chairman and CEO of UCAR.

　　Legal professionals believe that the above-mentioned three companies’ actions violated Article 8 Paragraph 2 of the "People’s Republic of China Anti-Unfair Competition Law", “Operators shall not organize false transactions to help other operators conduct false or misleading commercial publicity "The provisions constitute an aid to false propaganda.

　　According to the reporter's understanding, the State Administration for Market Regulation has fined 61 million yuan on 45 companies involved in the "Luckin Coffee Fraud Case".

　　Although Luckin Coffee paid US$180 million this time, it reached a settlement with the US Securities and Exchange Commission.

However, many analysts believe that the penalties imposed by the Chinese regulatory system have not yet ended.

　　"Luckin Coffee" may receive a fine from the Ministry of Finance.

Earlier, the Ministry of Finance stated that it has basically completed the quality inspection of accounting information since the establishment of the two main operating entities of Ruixing Coffee Company.

The inspection found that from April 2019 to the end of 2019, Ruixing Coffee Company increased its transaction volume by RMB 2.246 billion through the fictitious commodity certificate business.

　　According to Article 43 of the "Accounting Law of the People's Republic of China", forgery or alteration of accounting vouchers, accounting books, and preparation of false financial and accounting reports, which constitute a crime, will be investigated for criminal responsibility in accordance with the law.

For example, the directly responsible person in charge and other directly responsible persons may be fined not less than 3,000 yuan but not more than 50,000 yuan, and the accounting personnel shall not engage in accounting work within five years.

　　Luckin Coffee may also receive a fine from the tax department.

According to Article 64 of the Tax Administration Law of the People's Republic of China, if a taxpayer or withholding agent fabricates a false tax calculation basis, the tax authority shall order it to make corrections within a time limit and impose a fine of less than 50,000 yuan.

　　Industry insiders believe that Ruixing's tax credit rating may also be downgraded and listed as a key monitoring object by taxation, increasing the frequency of supervision and inspection.

The taxation department will also recommend relevant departments to restrict or prohibit operations, investment and financing, import and export, production licenses, and qualification reviews.

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