China’s Centurium Capital Gains Control of Luckin Coffee

The filing didn’t say how much the consortium—which also includes investment firms IDG Capital and Ares SSG Capital Management—paid for the shares.

“We will continue to support Luckin’s long-term growth and development,” Centurium said in a statement Thursday.

Ms. Qian was fired by Luckin May 2020 after the company discovered some employees fabricated more than $300 million in sales. Mr. Lu was ousted not long after.

Luckin, which is incorporated in the Cayman Islands and runs a large coffee chain in mainland China, has been in what’s known as “provisional liquidation,” a type of court-led restructuring.

Mr. Lu and Ms. Qian lost control of their Luckin shares in the summer of 2020, after the former chairman defaulted on a $533 million margin loan from banks that the shares had been pledged to. A British Virgin Islands court appointed KPMG as liquidator of the assets.

The upstart coffee chain’s American depositary receipts had plunged in value in the spring of that year, after Luckin revealed some of its revenue was made up. In May 2020, The Wall Street Journal reported that Luckin inflated sales by booking numerous purchases of vouchers that could be exchanged for cups of coffee, and fabricated supplier contracts to help mask the chicanery.

The Journal’s reporting showed that some of the companies involved in the fraud had ties to Mr. Lu. Investigations by regulators in the U.S. and China subsequently corroborated many of the Journal’s findings. Luckin later that year agreed to a $180 million fine from the U.S. Securities and Exchange Commission. The company has also been delisted from the

Nasdaq Stock Market.

An independent investigation commissioned by Luckin’s board into the accounting misdeeds separately concluded that Mr. Lu knew or should have known about the fabricated transactions, the Journal previously reported.

Mr. Lu has maintained that he was unaware of the fraud. Not long after leaving Luckin’s board, he tried—and failed—to retain control of the company by nominating new directors to its board. Mr. Lu declined to comment via his attorney.

Luckin is currently run by Guo Jinyi, an early Luckin employee, who took over as CEO when Ms. Qian was fired and became chairman after Mr. Lu was ousted.

In January 2021, Mr. Lu, together with some Luckin employees, sent a petition to the company. Their letter accused Mr. Guo of corruption, embezzlement and incompetency.

Luckin’s board set up an independent panel that conducted an investigation into the allegations, with the help of external lawyers and forensic-accounting experts. The company said the following month the probe found “no evidence substantiating misconduct” by Mr. Guo, and that some members of Luckin’s former management were behind the petition.

Luckin’s accounting scandal had earlier created problems for Centurium, which had been seen as a rising star in China’s private-equity circles.

The firm was founded by David Li, a former head of Asia at global private-equity firm Warburg Pincus and a former Goldman Sachs and Morgan Stanley investment banker. Luckin’s inflated sales disclosure took place just as Centurium was close to raising $2 billion for a new fund. The firm had to put off its fundraising plan as a result, the Journal reported at the time.

In mid-2021, Centurium restarted the fundraising and bagged more than $700 million for the new fund from a group of international investors, according to a person familiar with the matter. The fundraising is still ongoing, the person added.

Write to Jing Yang at [email protected]