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Luckin chairman Lu Zhengyao quits from CAR Inc amid escalating coffee chain scandal

Written by Wency Chen Published on   2 mins read

The scandal-hit entrepreneur may face criminal charges.

Charles Lu Zhengyao, the chairman of scandal-plagued Luckin Coffee (NASDAQ: LK), has resigned from its chairman position at car rental firm CAR Inc (HK:0699), where he also serves as a non-executive director, following reports indicating that Lu might face criminal charges over his involvement in Luckin’s fraudulent operations.

CAR Inc, China’s largest car rental platform by vehicle fleet size, announced Lu’s resignation on the morning of June 10, to allow Lu to “devote more of his time to fulfill his commitment with UCAR and other businesses,” the firm added as the reason behind the move.

UCAR, also founded and chaired by Lu, is a ride-hailing platform and holds a 21.26% stake in CAR Inc as its parent company. The announcement comes four days after media reports revealed that Lu is likely to face criminal charges in China, since authorities found emails that could prove Lu’s participation in Luckin’s sales data fabrication, according to local financial media outlet Caixin.

CAR Inc added on his statement that lenders now have the right to require the company to pay back loans immediately. The sum of such loans owned by CAR Inc is around USD 168 million.

CAR Inc’s stock surged by 13.81% to HKD 2.39 (USD 0.31) per share on the Hong Kong Stock Exchange following the announcement. Shares of Luckin Coffee fell instead more than 10% on Monday, closing at USD 4.29 on Nasdaq.

Read more: The rise and fall of Luckin Coffee, once China’s most promising coffee startup

Earlier in May, when Nasdaq gave Luckin a delisting notice over the company’s USD 310 million accounting scam, Lu said in a personal statement that he believes in Luckin’s business model and logic.

“A lot of problems have been caused by my aggressive entrepreneurship style and the company’s rapid growth, but I definitely didn’t fool investors with a ‘phony concept,'” he said, referring to Luckin’s operations.

Last week, CAR Inc announced that UCAR is set to sell all of its 21.26% stake in CAR Inc to Beijing Automotive Group (BAIC Group) via a strategic cooperation agreement, without disclosing the exact figures, KrASIA wrote, hinting that the move would allow Lu to cash out his assets. CAR Inc has a market capitalization of HKD 4.88 billion (USD 629.67 million).


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