(Yicai Global) April 3 -- Chinese coffee chain Luckin Coffee yesterday took the lid off a CNY2.2 billion (USD310 million) financial fraud, tanking its stock price. Joy Capital, one of Luckin Coffee's major investors, today denied that it had sold stock in the roaster.

Joy Capital has not yet sold any shares in Luckin Coffee, a company insider told Yicai Global. "I and Qian Zhiya (founder and chief executive of Luckin Coffee) have not sold a single share in the company," Liu Erhai, founder and managing partner of Joy Capital, had said earlier. "We're reluctant to do so."

Liu stepped down as a member of the company's audit committee, Luckin Coffee said in a statement in March. Liu's retirement was a normal replacement of committee personnel one year after the coffee chain's listing, Joy Capital said.

The US Securities and Exchange Commission website also shows that Joy Capital has no record of selling Luckin shares.

"Luckin Coffee is a public company, and everything is based on the company's statements," the insider said in response to a question on how Joy Capital will handle the difficulties after Luckin Coffee's stock crashed.

In an internal circular obtained today, Yicai Global noted that Joy Capital was very surprised by the Luckin Coffee scam. It told its partners that this had compromised everyone's interests because they have not sold any of the company's shares.

Joy Capital has lost 4.3 percent of a USD33-million investment in Luckin Coffee and another 45.5 percent of a USD49 million investment based on the data in the circular and Luckin Coffee's share price at yesterday's close.

Luckin Coffee's internal investigations revealed that Chief Operating Officer Liu Jian and some employees were suspected of financial fraud, totaling CNY2.2 billion, the company said in a statement late yesterday. Shares of Luckin Coffee [NASDAQ:LK] plummeted as a result, tumbling 75.6 percent to close at USD6.40.

It may be recalled that Muddy Waters released an 89-page anonymous short-selling report on Luckin Coffee on Jan. 31. It accused Luckin of business data fraud and inherent flaws in its business model, allegations Luckin denied. But the company's own internal investigation report yesterday confirmed the basic allegations in the Muddy Waters research report.

Editors: Tang Shihua, Peter Thomas