(Bloomberg) --
Chinese regulators will impose penalties on Luckin Coffee Inc., after an official investigation into the beleaguered coffee chain's accounting practices found evidence of data fudging going as far back as April 2019.
The Xiamen-based company was found to have inflated its revenue by 2.12 billion yuan ($304 million) from April to December, or 41% of the total reported revenue for this period, according to a statement on China's Ministry of Finance website Friday. Profit was inflated by 908 million yuan and costs by 1.21 billion yuan for these months.
The regulator, which was probing the books of Luckin and 23 of its related entities, will announce the details of the penalties later, it said in the statement. China's State Administration for Market Regulation said in a separate statement that Luckin fabricated data to gain an unfair competitive edge and will be dealt with as per the competition law.
The findings are another blow for the fallen coffee chain, once seen as a high-flying challenger to Starbucks Inc. and counted among one of China's best growth stories. The accounting scandal, that emerged in April this year, led to a delisting from Nasdaq and ouster of its chairman and co-founder, Lu Zhengyao.
A Luckin representative didnt immediately respond to Bloomberg's request for comments on the regulators' statements.
Luckin Scandal Is Bad Timing for U.S.-Listed Chinese Companies
The result was in line with Luckin's internal investigation earlier this month that led to the startup's shareholders voting out Lu, in an attempt to distance the company's business operations from the accounting scandal.
Luckin fired Chief Executive Officer Jenny Zhiya Qian and Chief Operating Officer Jian Liu in May.
The startup, which was listed on Nasdaq in May 2019, received a delisting notice from the bourse in June this year for its failure to file the annual report.
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