MGS 3520 04 BUS ETHICS AND SOC RES
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Jada McBride
CoPIs:
Alex Mitchell, Zymir Mobley, Maria Sanchez, Joshua Melvin, Sean Mena
College:
College of Business and Public Management
Major:
Management
Faculty Research Advisor(s):
Dawn Adams-Harmon
Abstract:
Luckin Coffee Inc. committed accounting fraud by purposefully inflating retail sales to over $300 million. This was accomplished by several dishonest techniques, including creating a fake operations database, inflating costs, and tampering with accounting records. The antifraud provisions of the Securities Act of 1933 were broken by this fraudulent activity between January 2020 and at least April 2019, resulting in significant overstatements of revenue and understatements of net losses in Luckin Coffee's financial statements. When the scam was uncovered, investors who had lost money on buying Luckin Coffee's American Depositary Shares (ADS) on the NASDAQ, as well as debt and equity investors, were among those who suffered adverse effects. Luckin Coffee cooperated with the SEC investigation to rectify the situation, initiated an internal investigation, and terminated personnel involved in or aware of the fraudulent activities. The Luckin Coffee case serves as a reminder of the value of moral behavior in the workplace, which includes decency, openness, accountability for wrongdoing, duty to stakeholders, and compliance with legal requirements. Businesses that prioritize ethical behavior protect their brand, earn their customers' trust, and help them succeed and survive in the long run.