Luckin Coffee said Tuesday that it has fired its CEO and COO as part of an internal investigation into sales fraud.
Jenny Zhiya Qian, Luckin's former CEO, and Jian Liu, its former COO, also resigned from the Chinese company's board. The changes went into effect on Monday.
The board appointed Jinyi Guo, a board member and a senior vice president in the company, as acting chief executive.
The coffee chain disclosed on April 2 that an internal probe found that Liu had fabricated 2019 sales by about 2.2 billion yuan ($310 million). The chain previously said net sales for the first nine months of 2019 were 2.9 billion yuan ($413 million). The company placed six other employees, who were either involved in or had knowledge of the fraud, on suspension or leave.
At the time, Luckin said the internal investigation was at a preliminary stage and its estimate of the fabricated sales was not verified by an independent auditor. The company's special committee retained Kirkland & Ellis as its independent outside counsel and FTI Consulting as an independent forensic accounting expert.
The investigation is still ongoing. The company said it is cooperating with regulatory agencies in both the United States and China.
Trading in Luckin stock on the Nasdaq has been halted since April 7 for pending news. There is no time limit for how long a stock can be halted for pending news. Its shares had plummeted 83% since disclosing the fraud.
The coffee chain has continued to operate during the probe. Reuters reported in early April that downloads for its app skyrocketed as Chinese consumers rushed to redeem its offer for a free cup of coffee.Â
The  2½-year-old company has tried to build a customer base in China with smaller locations formatted for convenience and offering steep discounts. In January, the company said it had more than 4,500 locations in China, several hundred more than rival Starbucks. Starbucks has responded to the competitive threat by opening cafes in China designed for quicker pickup and delivery and less seating.Â
Luckin also said Tuesday it has appointed Wenbao Cao, the chain's head of store operations and customer service, and Gang Wu, head of its strategic partnerships and supply chain management, to the board.
Before joining Luckin, Cao worked for McDonald's China for more than 23 years. Wu worked in the airline industry for 26 years prior prior to working for Luckin.
U.S. hedge fund Muddy Waters raised allegations of fraud in January and bet against the stock. Luckin denied the allegations at the time but still hasn't said why it started its internal probe.
