Lu Zhengyao

And you can tell that that's the case because immediately after Luckin Coffee launched its internal investigation to figure out who's involved in the fraud, and whether there are other people within the company involved in the fraud.

Now, the interesting thing about the internal investigation that's being conducted by Luckin Coffee right now is that even though the final reports are not out yet from the investigation, but the preliminary results are indicating the potential implication of the chairman of the board, Lu Zhengyao, in this fraud.

Basically, the report is finding that the third-party companies that were used to fabricate the revenue, the $300 million revenue.

These third-party companies are owned by someone who was a classmate or a schoolmate of Lu Zhengyao, the chairman of the board.

And based on that, the investigation board is recommending that the board of directors would meet at some point in the month of July to vote on the possible removal of the chairman of the board, Lu Zhengyao.

now that we talked about the history of the company and the timeline of events that took place i want to spend some time talking about the observations that i have about the events in terms of accounting and corporate governance now the first thing i want to discuss is ownership because uh the founder of the company and the ceo of the company that was fired in may and jenny tian owns 20 percent stake in the company and lou jengiao uh the chairman of the board of directors owns 30 percent of the company um compared to uh liu jian who basically was the full guy who took the fall for the fraud initially in april um and he owns options and basically stock options are financial instrument that gives you the possibility to buy stock in the future and in his case in the coo's case his options if they were to be exercised they would amount to less than one percent ownership in the company So this is one of the things that jumps right at me from this case, is that the ownership by the chairman of the board and the CEO is so much larger than the COO who took the fall.

So basically this guy here, Liu Jian, the COO, took the fall for this revenue fraud, and basically he owns less than 1%.

So, Lu Jingyao is the chairman of the board, and typically, as the chairman of the board of directors, your involvement in the business shouldn't be in the day-to-day activity and directing revenue transactions.