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How a short-seller’s warning helped take down Luckin Coffee



In January, days after the shares of Luckin Coffee Inc. hit a record high on the Nasdaq Stock Market, giving the company a $12bn valuation, a cryptic email arrived in the inboxes of multiple short sellers.

“A new generation of Chinese Fraud 2.0 has emerged,” it said. “Companies that start off as fundamentally and structurally flawed business model [sic] that evolves into fraud.” The author offered to share customer receipts and videos from Luckin Coffee outlets, attached a long report about the company and said the short-sellers could publish and take credit for it.

Several American money managers reviewed the report, which accused Luckin of inflating its sales. Carson Block of Muddy Waters LLC published it, posting the 89-page report on Twitter on Jan. 31. Luckin’s auditor subsequently discovered that several employees had faked revenue and expenses and on April 2, the company disclosed that as much as $310m of its 2019 sales were fabricated. Its shares collapsed, less than 11 months after the company went public, and will soon be delisted.

The stunning fall of Luckin, an upstart rival to Starbucks in China that touted itself as the country’s largest coffee chain by stores, has sparked a lot of investor soul-searching. Should they have followed the recommendation of Block, who has bet against multiple listed Chinese companies? Should they have doubted the company when it refuted the allegations in the anonymous report? Could they have done more due diligence to determine whether Luckin’s reported growth was too good to be true?

Well-known investors who lost money when Luckin’s shares plunged include Stephen Mandel Jr.’s Lone Pine Capital and Steve Cohen’s Point72 Asset Management. Commodities-trading giant Louis Dreyfus—which entered into a coffee-roasting venture and juice business with Luckin—and two top Chinese private-equity firms also had sizable equity investments in the company.

Several money managers who earlier invested in Luckin said they had little reason to doubt the company because it also had the backing of other prominent investors like BlackRock Inc. and Singapore sovereign-wealth fund GIC Pte. Ltd.

Some American hedge funds, wary of getting burned after previous frauds involving listed Chinese companies like Sino-Forest Corp. that also inflated sales, said they subjected Luckin to extra scrutiny before deciding to invest.

One fund’s work included spot checks on individual stores, taking note of crowded ones and the ubiquity of Luckin’s blue-and-white coffee cups. Independent data they reviewed showed a growth in downloads of Luckin’s mobile app—used by customers to order products and make payments—that tracked the company’s reported growth in sales.

Some investors who visited Luckin stores in person had reservations about the company’s business and strategy.

Baillie Gifford & Co., a large UK money manager, sent an analyst to China last year to visit several companies including Luckin, according to an article on its website. The analyst, who speaks Mandarin, met with Luckin’s management, went to one of its shops in Shenzhen and spoke with customers. Baillie ultimately passed on making an investment.

BCC Global, a Shanghai-based due diligence and research firm, in September 2019 contacted some investment funds with an offer to monitor customer traffic and sales at a carefully selected sample of Luckin’s cafes. After receiving interest in its proposal and doing its research and analysis, BCC found discrepancies with Luckin’s reported figures, according to emails reviewed by the Journal and people familiar with the company.

When the anonymous report that Muddy Waters eventually tweeted made the rounds early this year, some short sellers were sceptical about claims that Luckin inflated its sales. Andrew Left, who runs Citron Research and back in 2015 drew attention to questionable sales practices at Valeant Pharmaceuticals International Inc., said he decided to buy Luckin shares after speaking to one of its top shareholders. The individual, whom Left didn’t identify, assured him that it had run channel checks and believed the company’s financial results were accurate.

Block of Muddy Waters said it was the first time he took a trading position based on someone else’s research while circulating it.

“It wasn’t anything glorious we did here. We just felt confident that the report was directionally correct, so we decided we’d be a good platform for it,” Block said in an interview. He declined to disclose the identity of the author, whom he said he has known for several years and believed is credible.

Recipients of the anonymous report got it from an email address containing the phrase “coffeeforclosers.” Its author signed off as “GLEN,” according to a copy of the email obtained by The Wall Street Journal.

They were apparent references to the line “coffee’s for closers” from the 1992 American film “Glengarry Glen Ross,” about four real-estate salesmen who use aggressive and high-pressure tactics to close deals.

The anonymous Luckin report was produced by Snow Lake Capital, a Chinese hedge fund with offices in Beijing and Hong Kong, according to people familiar with the matter. The firm was founded in 2009 by Sean Ma, its China-born and US-educated chief investment officer who previously worked at a hedge fund for Ziff Brothers Investments, a New York-headquartered family office.

A spokesman for Snow Lake declined to comment. The firm has about $2.5bn under management, according to its website. It made most of its money on Luckin in early April when the shares lost most of their value following the company’s disclosure of fabricated sales, according to a person familiar with Snow Lake’s returns. Its flagship China fund, however, was down 1.3% in the year through May, another person said.

It isn’t known why Ma and Snow Lake didn’t want to take credit for the Luckin research, though short sellers sometimes choose to hide their identities to maintain access to company executives and avoid regulatory scrutiny.

The Luckin report was the result of an elaborate undertaking during the fourth quarter of 2019 that involved more than 1,500 individuals, who fanned out to about 15% of Luckin’s more than 4,000 outlets across China, according to the report.

They counted customers in the stores, recorded more than 11,000 hours of videos and collected scores of customer receipts. After analyzing all the data, the report’s author concluded that Luckin had inflated its sales because the channel checks indicated that sales at its outlets were far lower than what the company had reported.

It didn’t have insights into what Luckin was actually doing behind the scenes to boost its reported sales.

Last month, The Wall Street Journal reported that a group of Luckin employees began engineering fake transactions ahead of the company’s May 2019 IPO. They first used individual accounts registered with cellphone numbers to buy vouchers that could be exchanged for cups of coffee, then used many little-known companies to make bulk purchases of vouchers, according to documents reviewed by the Journal and people familiar with the matter. Most Luckin employees were unaware of the scheme.

In some ways, Luckin was exceptional. Relatively few companies accused by short sellers of accounting chicanery ultimately disclose wrongdoing. In addition, shares of many companies accused by short sellers of accounting misdeeds have gained in value over time.

Between 2017 and 2019, short-sellers accused 32 US-listed companies of accounting misdeeds, according to Breakout Point, a data provider that analyses short-selling trends. In the six months following those allegations, 25 of the stocks gained and the rest declined.
Luckin’s shares fell in February after the anonymous report came out before rising again. Credit Suisse Group, the investment bank that led Luckin’s 2019 IPO and a follow-on sale of shares and convertible notes in January 2020, published a research report defending the company

“We found no hard evidence in the short-seller report to prove Luckin’s business as fraudulent, and some of the allegations are baseless or have major flaws, in our view,” a Credit Suisse report said on Feb. 4, maintaining an outperform rating on the stock. Morgan Stanley, which also underwrote Luckin’s share sales, didn’t address the allegations but kept the equivalent of a hold rating on Luckin in a report issued that month. After the company disclosed its accounting misdeeds, analysts at the two banks suspended coverage of the stock.

A Credit Suisse spokeswoman said the firm was one of five brokers with a buy or outperform rating on Luckin’s stock as of March 2020. Its research analysts based their views “on information prepared by management and financial data reviewed by the company’s auditors,” she added.

Accounting firm Ernst & Young Hua Ming LLP in April said it uncovered evidence that some Luckin employees had fabricated revenue and certain expenses. But just a few months earlier, the auditor reviewed the company’s interim financial statements that were included in a January 2020 prospectus for a share sale and issued a private “comfort letter” that indicated it didn’t have any issues with the numbers, according to a person familiar with the matter. A spokeswoman for EY declined to comment, citing client confidentiality.

“There’s very deep prejudice running through the industry that the big banks are the white shoes, well-pedigreed with good education, and the independent research firms are unwashed and not to be relied on,” said Anne Stevenson-Yang, co-founder of J Capital, a short seller that earlier this year also alleged that Luckin was inflating its sales.

Ultimately, it is difficult for even the most sophisticated investors to avoid falling prey to a publicly listed company that is determined to cheat, said JP Gan, a Chinese venture investor and founding partner of Shanghai-based INCE Capital.

“The basic principle of capital markets is trust. The default assumption is everyone is good because the bad apples have been screened out, or it won’t be listed,” he said.

Write to Jing Yang at, Juliet Chung at and Julie Steinberg at

This article was published by The Wall Street Journal.

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Finance minister addresses COVID-19 economic recovery plan at virtual event




Finance Minister Chrystia Freeland will provide an update on the Liberal government’s plan to recover from the pandemic-induced economic slowdown today.

Freeland is scheduled to speak at the Toronto Global Forum at 12:40 p.m. 

The finance minister is the keynote speaker for the final day of the three-day event, which brought together politicians, business leaders and academics from around the world to exchange views on global economic issues.

Her speech is happening on the same day the Bank of Canada released a new report predicting the country’s economy won’t fully recover what was lost to COVID-19 until 2022.

The bank’s monetary policy report estimates the economy will shrink by 5.7 per cent this year, but grow by 4.2 per cent next year and 3.7 per cent in 2022.

Prime Minister Justin Trudeau said this week that government officials are working on a “robust” budget update outlining the state of federal finances after months of spending on pandemic-related support programs.

The last detailed update came in the form of a fiscal snapshot tabled by then-Finance Minister Bill Morneau in July. It estimated the federal government’s budget deficit would hit $343.2 billion this year — but it was delivered before the Liberals made a series of costly changes to benefit programs that are sure to drive that number up.

In last month’s speech from the throne, the government promised to extend emergency supports for Canadians and struggling businesses hit by the COVID-19 crisis into next summer.

Trudeau said Monday the promised update won’t cite a specific fiscal anchor to keep spending from spiralling out of control.

In a recent report, the office of Parliamentary Budget Officer Yves Giroux estimated that the size of the debt compared to the size of the domestic economy — which had been the Liberals’ preferred fiscal anchor — could be around 48 per cent this year and next.

The debt this year is expected to push past $1.2 trillion.

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Marble Launches Maestro – Its Financial Literacy Educational Platform | 2020-10-28 | Press Releases





Launch of Maestro further expands the Marble platform with this educational component, as November marks the 10 th anniversary of Financial Literacy Month in Canada

Vancouver, B.C. – TheNewswire – October 28, 2020 – Marble Financial Inc. (CSE:MRBL ) (CNSX:MRBL.CN) ( OTC:MRBLF) (“Marble” or the “Company”) a financial technology company that empowers Canadians’ toward a positive financial future, is pleased to announce the launch of Maestro, Marble’s latest financial literacy educational platform, available to all MyMarble customers.

Maestro combines expert-curated educational content and skill testing quizzes to give Canadians the power to have both a foundation in crucial financial knowledge and the empowerment to effectively utilize Marble’s personal finance and credit rebuilding platform, MyMarble and its current products, Score-Up, and Fast-Track. Maestro users will benefit from over 30 different courses across three core financial foundations, credit, budget, and debt management.

Key findings from Statistics Canada’s 2019 Canadian Financial Capability Survey showed that 51% of 18 to 35 year-old Canadians surveyed seek financial literacy from online sources, displaying a preference for easy-to-use and digestible online content. In addition to this, 44% of Canadians surveyed said they engaged in financial education to strengthen their financial knowledge, proving a high demand and additional user acquisition stream with a product such as Maestro.

November marks the 10 th anniversary of Financial Literacy Month in Canada, and today, millions of Canadians are still seeking some form of online financial education. The launch of Maestro adds an additional dimension to Marble’s product line, allowing Marble to become its users’ primary personal finance solution through a more holistic, end-to-end financial experience.

Maestro is now available on the MyMarble Platform and offers the following:

  • – Available to all Marble customers at no cost, monthly fees or subscription

    – Over thirty expert-curated online courses in the credit, budget and debt management sectors

    – Desktop and mobile friendly

    – Video enabled and audio course content for all audiences

“Canadian’s are used to the traditional ways when it comes to improving their financial literacy – friends or family, financial advisors, or banks,” said Karim Nanji, CEO of Marble. “The description of a ‘Maestro’ is someone who conducts and is a master of their respective trade. The ability to master finances is something we believe all Canadians can achieve through financial literacy offered in an effective and easy online-learning environment. With Marble’s Maestro, we are very excited to fill the demand to further empower and educate Canadians. With the power of our online technology and our industry-leading MyMarble, Score-Up, and Fast-Track solutions, our customers have all the tools needed to take control of their personal finances.”


Karim Nanji, CEO

About Marble Financial Inc. (CSE: MRBL; OTC: MRBLF) Marble leverages its proven data driven strategies utilizing the power of machine learning, data science, and artificial intelligence, through its industry-leading proprietary technology solutions Fast-Track, Score-Up, and Credit-Meds to engage in and navigate a clear path for Canadians towards financial wellbeing and a meaningful credit score. Since 2016, Marble is proud to have empowered thousands of marginalized Canadians to a positive financial future, and we continue to establish ourselves as leaders in financial wellness through the licensing of our proprietary products on the Marble Platform.

For further information, please visit the company’s website at

Mike Marrandino,

Executive Chairman

T:(855) 661-2390 ext. 104



Caution Regarding Forward-Looking Information

This release contains “forward-looking information” as such term is used in applicable Canadian securities laws, including statements regarding the Private Placement and the use of proceeds therefrom. The use of any of the words “target”, “plans”, “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. Such forward-looking information is based on management’s expectations and assumptions, including statements relating to the future plans and objectives of the Company, the Company’s expectations surrounding the market potential of Maestro, Score-Up, Fast Track and the benefits including potential credit score improvement, building and management results. In making the forward-looking statements included in this news release, the Company has applied several material assumptions, including but not limited to, that the Company’s financial condition and development plans do not change as a result of unforeseen events, and that the Company will and has received all required regulatory approvals in the jurisdictions across Canada that it will be offering this product. Forward-looking information is subject to a variety of risks and uncertainties and other factors that could cause plans, estimates and actual results to vary materially from those projected in such forward-looking information. Factors that could cause the forward-looking information in this news release to change or to be inaccurate include, but are not limited to: general economic, market or business conditions; changes in the Company’s financial condition and development plans; and other risks and uncertainties as set forth in the Company’s most recent continuous disclosure filings filed under the Company’s profile at .

Although the Company has attempted to consider important factors that could cause actual costs or results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. The forward-looking information included in this release is expressly qualified in its entirety by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.

Copyright (c) 2020 TheNewswire – All rights reserved.

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Despite Financial Strain, Harvard Not Considering Varsity Athletic Team Cuts | News




Harvard Athletics has spared its personnel and 42 NCAA Division I programs from cuts as it drastically reduces operations in the face of the COVID-19 pandemic, Director of Athletics Erin McDermott said in a Tuesday interview.

McDermott, who began her tenure as Harvard’s first female Athletics Director this summer, said she spent her first four months at the helm finding ways to make the department “austere in our operation.”

Harvard’s fields, courts, and pools now sit largely empty as a result of the coronavirus crisis. The Ivy League canceled the fall sports season and Harvard limited on-campus living to freshmen and a small share of upperclassmen this semester to curtail virus’s spread.

McDermott said the global health crisis has naturally circumscribed the department’s operations.

“Operations are so drastically different without having competition, you know, we’re not traveling teams, we’re not hosting competition,” she said. “With the student athletes that we have on campus, and with our recreational operations that we have ongoing for students and staff on campus, we’re operating really on an as need — and what’s really essential — kind of way.”

“There wasn’t really definitive, necessarily ‘cuts’ that were made,” McDermott added. “We’re just not doing all the same things that we would typically do.”

Still, the department has not broken even.

McDermott said two major sources of revenue the Athletics Department lost include the Harvard-Yale football game — which Harvard was scheduled to host next month — as well as the Boston Calling Music Festival, which takes place at the athletics complex every spring. As a result, McDermott said, a large part of her day-to-day job over the past four months has consisted of schmoozing potential donors virtually and soliciting their contributions.

Though McDermott did not state the extent of the department’s financial losses, the Faculty of Arts and Sciences — which oversees Harvard Athletics — netted more than $30 million in “unforeseen expenses and lost revenue” associated with the coronavirus as of April.

Despite financial pressures, Harvard Athletics has not cut any of its teams or fired its employees, according to McDermott.

While universities across the country — including peer schools such as Dartmouth and Stanford — have recently axed a handful of athletics programs to improve their balance sheets, McDermott said Harvard has not considered eliminating any of its 42 varsity teams — the most of any university in the country.

“There haven’t been conversations about cutting teams,” she said.

McDermott also said the department has been “fortunate” not to have to reduce its payroll, though it has adhered to the University-wide hiring freeze.

—Staff writer Ema R. Schumer can be reached at Follow her on Twitter @emaschumer.

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