SEC Subpoenas Faraday Future Executives

Matt Posky
by Matt Posky

Several executives from perpetual automotive startup Faraday Future have reportedly been subpoenaed by the U.S. Securities and Exchange Commission as part of an investigation into inaccurate statements made to investors. Though, considering the nameplate’s history, it would be impossible to assume which item the SEC will be focusing on thanks to FF’s exceptionally long history of industrial misgivings.

We’ve covered Faraday Future’s long and bizarre story from the early days of delivering half-baked, though otherwise impressive, concepts to its more recent status as an automaker in the ethereal sense. It’s promised the moon and only managed to deliver a handful of production husks that never surpassed the body-in-white phase and some “production-intent” prototypes of the FF91. Though the larger story is the SEC’s sudden interest in electric vehicle startups that went public via mergers with blank check firms, better known as special purpose acquisition companies (SPACs), over the last two years.

Starting in 2019, SPACs became all the rage for burgeoning EV firms hoping to shore up a lot of capital by going public. But criticisms began to emerge after exceptionally high valuations failed to result in the companies moving forward as promised. Many would-be automakers started walking-back promises, became embroiled in unfavorable reporting (often by Hindenburg Research), or confessed to exaggerating the status of promised technologies and production capabilities. As a result, the Securities and Exchange Commission has launched investigations into numerous companies — including Lucid Group and Lordstown Motors.

Faraday is just the latest in a growing number of automotive startups that are now under investigation. But its troubles stretch all the way back to its founding in 2014, when nobody could get a clear sense of its management structure or where its funding was coming from. By 2017, the company saw itself backing out of a planned factory in North Las Vegas due to financial constraints. This was followed by several contractors claiming FF owed money, several management shakeups, rolling layoffs, and its majority shareholder/founder (Jia Yueting) getting into trouble with Chinese regulators stemming from the dealings of his other companies — some of which were curiously involved with FF. Financial problems persisted and he declared bankruptcy in Delaware in 2019 and the Central District of California in 2020 after refusing to return to China.

However Faraday Future spent the majority of its time fundraising, receiving numerous investments as it perpetually seemed to be on the cusp of a major production breakthrough. This included $854 million from Evergrande Group, in exchange for a 45-percent stake in the company. But the deal went sideways almost immediately after it was penned in 2018. A year later, FF announced a new 50/50 joint venture with Chinese online game operator The9 to make EVs in China — though nothing seems to have come of it. In July of 2021, Faraday became a publicly-traded company after merging with a SPAC known as Property Solutions Acquisition Corp.

This is the arrangement that ultimately alerted the SEC, which the company has confirmed recently subpoenaed some members of Faraday Future Intelligent Electric Inc’s management team as part of an investigation hoping to determine the accuracy (or inaccuracy) of statements made to investors. Reuters appears to have reported on the matter first, with the company confirming the details shortly thereafter.

From Reuters:

An internal review had in February identified certain inaccurate statements and the company cut the base salaries of its Chief Executive Carsten Breitfield and founder Jia Yueting, asking them to report to newly appointed Executive Chairperson Susan Swenson.

The review by a special committee formed in November, however, rejected claims made by a short-seller that called the startup “a new EV scam in town”, saying they were not supported by the evidence reviewed.

The startup said on Thursday it would miss the deadline for filing its 2021 annual report due to delays caused by the internal investigation. It had previously delayed the filing of its quarterly report in November.

The review also decided that the company’s declaration that it had received over 14,000 reservations for the FF91 vehicle was potentially misleading due to only a few hundred of those reservations actually having any real money behind them. The rest were simply unpaid indications of interest, rather than formal reservations. The resulting fallout has seen numerous top-level executives receive cuts to their compensation, move to other roles within Faraday Future, or simply leave the company. For what it’s worth, the EV startup has said it will continue to implement the “appropriate remedial actions” approved by the internal review committee and is continuing with its own investigation.

[Images: Faraday Future]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Dukeisduke Dukeisduke on Apr 01, 2022

    In the interest of transparency, they should have just called themselves "Faraday Never".

  • Dukeisduke Dukeisduke on Apr 01, 2022

    Matt, are you guys going to put up an article today on the latest Ford recall (737k vehicles)? It's about oil leaks and resulting fires in Escapes and Bronco Sports with the 1.5l four, and a software problem with trailer brake controllers on 2021-22 F-Series, and 2022 Mavericks, Expeditions, and Navigators.

  • Bof65705611 CarPlay is awesome. Nav and music have been mentioned but it’s also amazing for texting, WhatsApp, my calendar, Zoom calls, FaceTime calls, and phone calls. I don’t like touchscreens in the car but both my cars (BMW, Mazda) use a rotary knob, which isn’t great, but doable with minimal time with eyes off the road.
  • Tassos Most people here who think it is a good idea have NO idea how much such a conversion costs. Hint: MORE than buying an entire new car.
  • Zipper69 Current radio ads blare "your local Chrysler, Dodge, Jeep, Ram dealer" and the facias read the same. Is the honeymoon with FIAT over now the 500 and big 500 have stopped selling?
  • Kjhkjlhkjhkljh kljhjkhjklhkjh hmmm get rid of the garbage engine in my chevy, and the garbage under class action lawsuit transmission? sounds good to me
  • ToolGuy Personally I have no idea what anyone in this video is talking about, perhaps someone can explain it to me.
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