Why Luckin Coffee Stock Plunged Today

Shares of Luckin Coffee (NASDAQ: LK) plummeted more than 20% on Thursday after The Wall Street Journal released a scathing report claiming that firms linked to the company's chairman and controlling shareholder played a central role in its accounting scandal.

Luckin Coffee reportedly sold vouchers redeemable for "tens of millions of cups of coffee" to businesses linked to its chairman and largest shareholder, Lu Zhengyao (who also goes by the name Charles Lu), according to the Journal. By doing so, Luckin was able to record higher sales than its stores were actually generating.

Additionally, the Journal reported that Luckin used a fictitious employee to process more than $140 million of raw material payments as part of the ruse.

Source Fool.com