Luckin Coffee based in China is being investigated by the SEC. Massive fraud discovered second through fourth quarter of 2019. Stock is down about 75%.

Overnight, Stock Advisor recommendation Luckin Coffee (NASDAQ: LK) shocked investors with a statement declaring that a special committee formed to oversee an internal investigation had found leading evidence of significant fraud perpetrated by its COO Jian Liu and certain employees last year. Luckin Coffee's stock is down more than 70% on this news.

Here is the release: http://investor.luckincoffee.com/node/6886/html.

The preliminary stage of the investigation has revealed, so far, "certain misconduct, including fabricating certain transactions" to the tune of around RMB 2.2 billion in sales, or north of $300 million, between the second and fourth quarters of 2019. For a company that reported RMB 3.4 billion in 12 months' sales, that is a massive amount of fraud.

None of these numbers have yet been verified by auditors or the Special Committee, but clearly the company is panicked about the volume of deceit. Luckin is investigating the final impact on its reported financials, but the news will not be good.