Shares in Luckin Coffee have slumped after the corporate mentioned one among its high executives and different workers had faked gross sales figures.
The Chinese espresso chain has now suspended its chief working officer Jian Liu and workers reporting to him.
It comes after the corporate appointed a particular committee to analyze points in its monetary statements for 2019.
Luckin, which competes with Starbucks, had been one among China’s few profitable US inventory market listings final yr.
The Nasdaq-listed firm mentioned its investigation had discovered that fabricated gross sales from the second quarter of final yr to the fourth quarter amounted to about 2.2bn yuan ($310m; £250m). That equates to about 40% of its estimated annual gross sales.
It additionally mentioned that it nonetheless wanted to analyze and confirm different prices and bills that had been considerably inflated throughout the identical interval.
At the identical time Luckin warned buyers that they need to now not depend on its earlier monetary statements that had confirmed the corporate’s fast development.
The firm had 3,680 shops as of the tip of September, in accordance with its third quarter 2019 earnings launch. That represents an almost six-fold improve for the reason that earlier June.
Luckin’s US inventory market worth had almost tripled since its debut in New York in May, topping $50 a share earlier this yr.
Mr Liu has been Luckin’s chief working officer since May 2018.
In current months although buyers had begun to develop into cautious that there could also be some severe points on the firm after an nameless report alleging that it had made up a few of its numbers.
Earlier this yr the high-profile short-seller Muddy Waters Research began betting towards the corporate’s shares, citing a report that alleged that Luckin had fabricated monetary and working figures from the third quarter of final yr.
At the time, Luckin strongly denied the allegations, describing them as “misleading and false”.
Luckin’s shares ended Thursday’s buying and selling session down by greater than 75% at $6.40 after hitting a document low of $4.90 earlier within the day.