Shares in Luckin Coffee have slumped after the company said one of its top executives and other employees had faked sales figures.
The Chinese coffee chain has now suspended its chief operating officer Jian Liu and staff reporting to him.
It comes after the company appointed a special committee to investigate issues in its financial statements for 2019.
Luckin, which competes with Starbucks, had been one of China’s few successful US stock market listings last year.
The Nasdaq-listed company said its investigation had found that fabricated sales from the second quarter of last year to the fourth quarter amounted to about 2.2bn yuan ($310m; £250m). That equates to about 40% of its estimated annual sales.
It also said that it still needed to investigate and verify other costs and expenses that were substantially inflated during the same period.
At the same time Luckin warned investors that they should no longer rely on its previous financial statements that had showed the company’s rapid growth.
The company had 3,680 stores as of the end of September, according to its third quarter 2019 earnings release. That represents an almost six-fold increase since the previous June.
Luckin’s US stock market value had almost tripled since its debut in New York in May, topping $50 a share earlier this year.
Mr Liu has been Luckin’s chief operating officer since May 2018.
In recent months though investors had begun to become wary that there may be some serious issues at the company after an anonymous report alleging that it had made up some of its numbers.
Earlier this year the high-profile short-seller Muddy Waters Research started betting against the company’s shares, citing a report that alleged that Luckin had fabricated financial and operating figures from the third quarter of last year.
At the time, Luckin strongly denied the allegations, describing them as “misleading and false”.
Luckin’s shares ended Thursday’s trading session down by more than 75% at $6.40 after hitting a record low of $4.90 earlier in the day.