BEIJING, May 12 (TMTPOST) Scandal-ridden Luckin Coffee said Tuesday that it fired CEO Qian Zhiya and COO Liu Jian as part of an ongoing internal probe over revenue fabrication.

Luckin, which vowed to replace its archrival Starbucks as China’s largest coffee chain last year, admitted in early April that its COO inflated sales revenue from the second quarter to the fourth quarter of 2019 by about RMB2.2 billion (about US$310 million). The coffee chain, incorporated in October 2017 and listed in May 2019 on Nasdaq, has been under a probe by U.S. and Chinese securities regulators since then.

The company board has appointed Director and Vice President Guo Jinyi as acting CEO, according to an announcement released on its official website.

Qian, who had been CEO since November 2017, oversaw the IPO of the company founded by the company’s Chair Lu Zhengyao. Liu was suspended from work since early April until his termination of employment with the coffee chain.

Cao Wenbao and Wu Gang, in charge of store operations and customer services, and strategic cooperation and supply chain management respectively, have been named as directors to replace Qian and Liu. Meanwhile, the Audit Committee of the board remains unchanged, according to the announcement.

In addition to the departure of Qian and Liu, the company has placed six other employees, who were involved in or had the knowledge of the fabricated transactions, on suspension or leave, according to the announcement.

The embattled coffee chain, also sent an email to its employees on Tuesday night, apologizing for all the trouble inflicted on them and their families and urging them to carry on their work.

In the email, the management said that the company is “fully cooperating” with the regulators. The management also thanked its employees for maintaining normal operations of the stores and “continuing product innovation” in over a month since the crisis started. The company claimed that its supply chain was also normal.

Luckin expanded quickly, by offering steep discounts to customers and opening minimalist stores, and completed its IPO in New York in less than two years after its incorporation. Its shares cratered more than 80% on April 2 upon its acknowledgement of the fraud. The trading of the shares has been on pause since April 7, pending further notice.

Recent Developments

On April 27, China’s securities regulator China Securities Regulatory Commission (CSRC) issued a statement, saying that it fully supported overseas regulators to investigate the fraud relating to the companies listed in their jurisdictions. It has shared audit reports on 14 China-based U.S.-listed companies with its U.S. counterparts, including the U.S. Securities and Exchange Commission (SEC) and the Public Companies Accounting Oversight Board (PCAOB), in accordance with the multilateral cooperation agreement.

CSRC stressed that it stated its stern stance immediately after the Luckin scandal emerged, adding that it has been always “actively cooperating” with foreign regulators.

On April 26, the officials of the State Administration for Market Regulation raided Luckin’s office in Beijing, triggering the speculation that the government was taking over the company. However, they just checked out original documents but fell short of seizing any, according to a source close to the matter.

On April 21, Thomas P. Meier, who was appointed as independent director of the Board in May 2019, resigned from the Board and its Audit Committee. Following his resignation, the Audit Committee of the Board consists of three independent directors.