Jonathan Stempel

NEW YORK, (Reuters) –Luckin Coffee Inc has reached a $175 Million settlement with shareholders class-action claims. The claim was that Starbucks’ Chinese competitor (NASDAQ:) had fraudulently inflated the share price of its shares by falsifying revenues.

The all-cash settlement was filed Monday night by lawyers for shareholders. It cited Luckin’s Cayman Islands liquidation proceeding and the related U.S. Bankruptcy Code protection filing.

This agreement also includes Luckin officials and underwriters for the Xiamen-based company’s initial public offering (2019, $645m) and later sale of American depositary share.

The preliminary settlement was approved by U.S. District Judge John Cronan of Manhattan on Tuesday. A hearing is scheduled for January 31, 2022 to discuss final approval. A Cayman Islands court must also approve the settlement.

Luckin denied wrongdoing. Requests for comment from U.S. lawyers were not promptly answered by the company.

Luckin, founded in 2017, closed March 2017 with around 5,000 stores.

Two weeks after Muddy Waters (NYSE) Research had accused Luckin of exacerbating revenue, shareholders sued Luckin.

Luckin’s stock price plunged 81% two months later after an internal investigation revealed that the chief operating officer of the company and his staff had fabricated sales of approximately $310,000,000 in 2019. This is about 40% less than what analysts projected.

Luckin agreed last December to pay a $180 million fine to settle U.S. Securities and Exchange Commission accounting fraud https://www.reuters.com/article/us-usa-sec-luckincoffee/luckin-coffee-to-pay-180-million-penalty-to-settle-accounting-fraud-charges-u-s-sec-idUKKBN28Q34P civil charges.

According to the SEC, Luckin was able to raise more than $864 Million from both equity and debt investors during fraud.

Shareholders in the class action are led by Swedish pension fund Sjunde AP-Fonden and the Louisiana Sheriffs’ Pension & Relief Fund.

Their lawyers, led by Kessler Topaz Meltzer & Check and Bernstein Litowitz Berger & Grossmann, may seek fees of up to 25% of the settlement fund.