The SEC has subpoenaed several Faraday Future officials as part of an inquiry into false representations made to investors, according to a securities filing on Thursday.
Following an internal investigation that found that Faraday Future workers made false claims to investors and that the company’s “business culture failed to appropriately prioritise compliance,” a subpoena has been issued. In the wake of this internal investigation, Faraday Future restructured its board, reduced the salaries of two senior executives, and suspended at least one more employee.
The SEC’s inquiry into Faraday Future raises the stakes significantly. The SEC’s current probe of EV companies that have gone public through a merger with a blank check, or special purpose acquisition, business, is also the latest in a long line of inquiries.
In the public markets of 2020 and 2021, joining together with a SPAC was the way to go. A number of electric vehicle companies have taken this approach in order to raise the funding necessary to develop and manufacture EVs at a large scale.. At least a half-dozen of them, including Lordstown Motors, Canoo, Electric Last Mile Solutions, and Lucid Group, have being investigated by the SEC.
Since its inception in 2014, Faraday Future has been the subject of many scandals. By 2021, it will be listed on the New York Stock Exchange following a merger with Property Solutions Acquisition Corporation (PSAC), which has subsequently drawn criticism from investors and regulators.
After the transaction, a short-seller report accused Faraday Future of making false representations. A forensic accounting company and independent legal counsel were called in to undertake an internal investigation by a special committee of directors.
The committee determined that workers exaggerated the contributions of Jia Yueting, the company’s founder and former CEO. According to the investigation, only a few hundred of the 14,000 reservations for the FF 91 car were paid; the rest, which reached 14,000, were unpaid indications of interest that the business claimed to have received. Moreover, the assessors determined that the company’s internal controls over financial accounting and reporting need to be improved.
Among the measures taken by the special committee was a 25% salary decrease for CEO Carsten Breitfeld and CFO Yueting. Brian Krolicki is now a member of the board’s audit and pay committees after resigning as chairman of the board and head of the nominating and corporate governance committee. Vice President of Global Capital Markets Jiawei (Jerry) Wang and General Counsel and Secretary Jarret Johnson both departed the business after being placed on administrative leave without pay.
By publishing a fresh statement Thursday, Faraday said that it is carrying on with its inquiry while “continuing to take relevant corrective procedures” recommended by a committee inside the company.
For the year ending December 2021, Faraday Future has also said that it would not be able to submit its annual report due to a lengthy internal probe.