China coffeehouse chain Luckin Coffee has reached a $175 million settlement of shareholder class-action claims that the company fraudulently inflated its share price by falsifying revenue.

 

The shareholders were represented by Kessler Topaz Meltzer & Check and Bernstein Litowitz Berger & Grossmann, both are acknowledged law firms in the field of plaintiff representation. Meanwhile Luckin was represented by Davis Polk & Wardwell.

 

Luckin went public on NASDAQ in 2019. Shareholders sued Luckin in February 2020, two weeks after short-seller Muddy Waters Research accused it of inflating revenue. Two months later, the company said an internal probe found that its chief operating officer and other staff fabricated about 40% of annual sales.

 

The SEC said Luckin raised more than $864 million from equity and debt investors while the fraud was taking place. Luckin agreed last December to pay a $180 million fine to settle SEC’s accounting fraud civil charges.

 

The final approval is scheduled on Jan. 31, 2022 to be announced. The settlement also requires approval by a Cayman Islands court.

 

Luckin denied wrongdoing. By the end of March it has about 5,000 stores.