On the evening of May 12, Beijing time, Luckin Coffee announced that the company’s CEO Qian Zhiya and COO Liu Jian have been suspended, and the board of directors appointed Luckin Coffee Co-Founder and Senior Vice President Guo Jingyi as acting CEO. At this point, it is 40 days since Luckin’s self-inflicted financial fraud.
The announcement also revealed that since the launch of the internal investigation, in addition to CEO Qian Zhiya and COO Liu Jian, the company has suspended or dismissed six other employees involved in or aware of the false transactions . At the same time, the board of directors asked Qian Zhiya and Liu Jian to resign as company directors, they have received their resignations.
Earlier, Luckin Coffee said in an April 2 announcement that the company’s COO Liu Jian and several employees who reported to him had engaged in certain misconduct, involving counterfeit transactions, amounting to Rmb2.2bn from the second quarter of 2019.
In addition, luckin coffee president’s office also issued a full internal letter on the evening of the 12th, said that “since the exposure of the fraud incident, Luckin Coffee into an unprecedented crisis and in the vortex of public opinion, brand image and reputation has been unprecedentedly impacted”, for the staff troubled to express deep apologies to employees. The internal letter also said that the investigation of the incident is still ongoing, the company will continue to cooperate fully with the relevant investigation.
To fill two vacant board seats, the board elected Cao Wenbao, senior vice president of Luckin Coffee, and Wu Gang, vice president, as directors of the company. Cao joined Luckin as Senior Vice President in June 2018, where he was responsible for store operations and customer service, having previously worked for McDonald’s China for more than 23 years. Wu Gang joined Luckin in March 2019 as Vice President of Strategic Cooperation and reported to CEO Qian Zhiya, who has served as Executive Vice President of United Airlines Co., Ltd. and has worked in civil aviation such as Air China, China Eastern Airlines and China United Airlines for more than 20 years.
From the resumes of the new executives, both new directors are “professional managers” who joined after Luckin started, and Guo, who was appointed acting CEO, is a co-founder of Luckin and has ties to the “Shenzhou Camp”. According to public information, Guo is a Ph.D. in Transport Planning and Management at Beijing Jiaotong University and has worked in the Transport Services Department of the Ministry of Transportation.
According to media reports, in 2011, When Guo was still in the taxi management office of the Ministry of Transportation, he got to know Lu Zhengyao because The Shenzhou car rental was the service object of the management office. He then joined Shenzhou Car Rental in 2016 as an assistant to the chairman of Shenzhou Car Rental, which was then lu Zhengyao. According to the Southern People’s Weekly, Guo Jinyi himself likes coffee and is quite aware of the coffee culture, and after he met Qian Zhiya for work reasons, “the two were caught together.”
Together with Luckin founder and CEO Qian Zhiya and CMO Yang Fei, he forms the core founding team of Luckin Coffee, which is responsible for offline businesses such as products and supply chains. In luck’s early years, he and Qian Zhiya and Yang Fei were frequent in the media and interviewed, and the most frequent time in the media was when Luckin sued Starbucks, which in May 2018 issued an open letter to Starbucks that it was suspected of monopolizing the Chinese market, and that the company would file a civil suit in court and file a complaint with the state’s antitrust agency.
In this case, Mr Guo was the man at the forefront – he had accused Starbucks in a circle of friends of “signing exclusive lease agreements with the property to allow suppliers to choose between one” and saying that “the evidence is conclusive, much unhelpful, and see it in court tomorrow”. Subsequently, he was late on May 16 thumviated the court to accept the case notice, the notice shows that Luckin Coffee v. Starbucks Coffee, Starbucks Enterprise Management (China) Co., Ltd. monopoly dispute, has been formally filed in court.
Luckin Coffee, which was also a start-up at the time, caused controversy by high-profile lawsuits against industry leaders. At the time, Starbucks responded by saying it had “no intention of engaging in market speculation from other brands”. The lawsuit came to an end a year and a half later, and in November 2019, Luckin Coffee quietly dropped it.
Although the new acting CEO still carries a strong “Shenzhou Camp” imprint, but from the founder Qian Zhiya was suspended, management blood changes and other actions, Luckin Coffee hopes to convey to the outside world to investigate the “financial fraud” incident, by the new leadership team to establish a new look.
Several of Luckin’s institutional investors retreated after a “financial fraud” announcement on May 11th that the company’s third-largest institutional shareholder, the investment fund CrGI, had cleared all of Luckin’s shares. As of February 10, CRGI held a 9.2% stake in Luckin. In addition, the well-known hedge fund Lone Pine Capital in the “financial fraud incident” the next day to close the position.
So far, Luckin Coffee’s stock is still in a suspended state.