China’s Luckin Coffee will pay $180 million to settle accounting fraud charges

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China’s embattled coffee delivery startup Luckin has reached a settlement with the U.S. Securities and Exchange Commission, agreeing to pay a $180 million penalty to settle charges that it overstated its revenues, expenses, and losses by the hundreds of millions of dollars.

The announcement by the market regulator arrived Wednesday evening, months after short-seller Muddy Waters first reported the alleged fraud early this year. In response to the allegations, Luckin said in April it would launch an internal probe. In June, the SEC said it would delist Luckin, and in July, Luckin admitted it did cook its books.

The fiasco came only a year after Luckin raised $651 million through its first time sale on Nasdaq. The company was founded in October 2017, making it one of the fastest companies to go from a startup to a public company.

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The startup, which aspired to take a piece of Starbucks’ sizable market share in China, allegedly fabricated more than $300 million in sales between at least April 2019 through January 2020, said the SEC announcement. Certain employees were found attempting to conceal the fraud by inflating the firm’s expenses by more than $190 million, “creating a fake operations database, and altering accounting and bank records to reflect the false sales.”

Luckin neither admitted or denied these claims, which were filed in a court in the Southern District of New York. The settlement is subject to court approval and the transfer of funds to security holders will need approval by Chinese authorities.

In September, China’s market regulator fined Luckin and 45 companies involved in Luckin’s frauds a total of $9 million after an investigation revealed the coffee company faked its numbers.

Despite the fraudulent scandal, Luckin claims business is still as usual. Operations of the firm and its stores are currently “stable and normal,” said the company in a notice on Wednesday.

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“Luckin will continue to cooperate with regulators and prioritize compliance. In the meantime, our management and staff will continue to ensure the firm’s stable operation.”

Short-sellers have been going after U.S.-listed Chinese firms this year. A report from Wolfpack Research accused iQiyi, a major Chinese video streaming service backed by Baidu, of inflating its numbers, a claim that triggered an SEC probe. GSX Techedu, a Chinese after-school tutoring company, was under a similar SEC investigation after short-seller Citron Research said the company fabricated sales numbers.

“While there are challenges in our ability to effectively hold foreign issuers and their officers and directors accountable to the same extent as U.S. issuers and persons, we will continue to use all our available resources to protect investors when foreign issuers violate the federal securities laws,” said Stephanie Avakian, director of the SEC’s division of enforcement, in the regulator’s announcement on Luckin.