China’s Luckin Coffee files for bankruptcy in the US

Luckin Coffee has filed for bankruptcy protection in the US, less than a year after the tech-enabled chain said it fabricated millions of dollars in sales.

Photo credit: Luckin Coffee

The Chinese rival to Starbucks sought protection from lawsuits and filed for Chapter 15 in the New York bankruptcy court to allow for financial restructuring. The petition will not impact Luckin’s day-to-day operations and all of its coffee shops will be open, the company said in a statement.

Luckin said it “continues to meet trade obligations in the ordinary course of business, including paying suppliers, vendors, and employees.”

The development comes after the US Securities and Exchange Commission (SEC) hit the coffee chain with a US$180 million penalty after finding out that Luckin cooked financial statements to the tune of nearly US$300 million in revenue and US$190 million in cost and expenses.

In an attempt to strengthen its balance sheet, Luckin is currently negotiating with stakeholders regarding the restructuring of its financial obligations, in an attempt to strengthen its balance sheet.

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As a result of its financial misconduct, the Chinese company’s shares plunged by as much as 89% last year, before being delisted from the Nasdaq. This also led to the firing of Luckin’s chief executive and chief operating officer.