By Jing Yang

Banks including Credit Suisse Group AG have won court orders to liquidate tens of millions of dollars in Luckin Coffee Inc. stock owned by embattled Chairman Charles Lu, a development that could weaken his control over the company as a crucial shareholder vote looms.

The Grand Court of the Cayman Islands ruled in favor of the lenders, which are owed $324 million after Mr. Lu defaulted on a margin loan facility, according to the judgment.

An accompanying windup order, which was delivered on June 16 and viewed by The Wall Street Journal, ruled a total of 131.25 million class B shares held by Primus Investments Fund LP, an entity controlled by Mr. Lu's family trust, be transferred within two business days to KPMG for liquidation. The shares are worth around $63 million, based on the recent $3.82 closing price of Luckin's American Depositary Shares.

Mr. Lu and his family have been the largest shareholders in Luckin and own class B shares that carry extra voting rights.

Mr. Lu controlled about 36.8% of Luckin's voting rights as of March this year, according to the company's regulatory filings. The liquidation would reduce the number of class B shares he holds by about a quarter. Such shares have 10 times the voting rights of Luckin's ordinary shares.

Mayer Investments Fund LP, an entity controlled by Suying Wong, Mr. Lu's sister, was also ordered to be wound up. Mayer owns 196.88 million class B shares of Luckin, all of which have been pledged to secure a loan, according to a Luckin filing.

The lenders -- which include Morgan Stanley, Goldman Sachs Group and Barclays Bank PLC -- have also filed a winding-up petition in the British Virgin Islands against Haode Investment Inc., another entity held by the Lu Family Trust. It wasn't clear whether the BVI court had ruled on the petition.

A spokesman for Luckin Coffee declined to comment. Mr. Lu couldn't be reached for comment.

The looming liquidations threaten to erode Mr. Lu's control over the upstart coffee chain, which on April 2 disclosed that as much as $310 million of its 2019 sales had been faked. The revelation sent Luckin's shares plunging; sparked an exodus of executives and directors; and prompted investigations by Chinese and U.S. authorities.

Luckin said last month it was cooperating with these investigations.

The company's market value, once as high as $12 billion, had fallen below $1 billion as of Friday's close.

On Friday, Luckin said it would hold an extraordinary general meeting July 5 in Beijing to vote out several directors, including Mr. Lu, and appoint two new independent board members.

People familiar with the company said even though the meeting would oust Mr. Lu, it appeared to be an attempt by the chairman to hang on to control and frustrate an internal investigation into the fake sales.

The request to hold the meeting came in a letter to the board Friday from Haode Investment, one of the shareholding entities controlled by Mr. Lu, according to a copy viewed by The Journal. While shareholders are being asked to remove Mr. Lu from the board, they are also being asked to remove three other directors -- David Li and Erhai Liu, early investors in Luckin via investment funds Centurium Capital and Joy Capital, and Sean Shao, an independent director who heads the special committee investigating the alleged fraud.

The two new independent directors, Ying Zeng, a partner at the international-law firm Orrick Herrington & Sutcliffe LLP, and Jie Yang, the vice dean of the China University of Political Science and Law's business school, were nominated by Mr. Lu's Haode Investment, the letter shows.

Ms. Zeng didn't respond to a request for comment. Ms. Yang declined to comment.

The letter to the board said the moves need to be approved "as soon as possible in order to restore members', employees', and the public's confidence in the company."

Luckin has launched an internal investigation into the alleged fraud overseen by a special committee of board members and carried out by international law firm Kirkland & Ellis and due diligence firm FTI Consulting. The probe has led to the firing of the chief executive and chief operating officer for their roles in the allegedly fabricated transactions.

Mr. Lu has repeatedly not complied with requests by the special committee to interview him and gain access to his phone and laptop, the people familiar with the company said. This has delayed the company's efforts to complete and publish the results of its internal probe and release audited financial results for 2019, one of the people said.

Mr. Lu said in a public statement last month that he "didn't set out to deceive investors" and welcomed any investigation into the matter.

Earlier this week, Luckin said in a filing it will miss a deadline to file its annual results due to the coronavirus pandemic and "the pendency of the Internal Investigation."

Luckin went public on the Nasdaq Stock Market in May 2019, in an offering led by Credit Suisse and Morgan Stanley, and raised more than $2 billion from investors in several issuances of stocks and bonds.

Nasdaq has since moved to delist Luckin. The company has a hearing scheduled June 25 with Nasdaq to appeal the decision, people familiar with the matter said.

The Wall Street Journal reported last month 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 turned to a number of little-known companies linked to Mr. Lu to make bulk purchases of vouchers, according to documents viewed by the Journal and people familiar with the matter. 



  Corrections & Amplifications


  This article was corrected June 21, 2020 to reflect that Luckin Coffee has an appeal hearing scheduled June 25 with Nasdaq. The original version of this article incorrectly said the appeal was with Nasdaq's listing council.