Faraday Future SEC Probe: Potential Enforcement Action

SEC Investigates Faraday Future Executives

The Securities and Exchange Commission (SEC) has issued notifications to Jia Yueting, founder of Faraday Future, and Jerry Wang, the company’s president. These letters, termed “Wells Notices,” indicate potential forthcoming enforcement actions stemming from a three-year fraud investigation.

Investigation Details

According to a recent regulatory filing, the SEC staff has internally decided to recommend enforcement measures against the electric vehicle manufacturer, its two aforementioned executives, and two additional former employees whose identities remain undisclosed.

The SEC’s focus centers on what it alleges were “purported false and misleading statements” made during the company’s 2021 merger with a special purpose acquisition company (SPAC).

Potential Consequences

The agency could pursue several remedies, including:

• An injunction or cease-and-desist order to prevent future violations of federal securities laws.
• Civil monetary penalties.
• Disgorgement of profits or other equitable relief.
• Any combination of these measures.

Faraday Future stated in the filing that it, along with Jia and Wang, intends to present arguments to the SEC staff explaining why an enforcement action is unwarranted.

Recent Developments

Multiple depositions of former Faraday Future employees have been conducted by the SEC in recent weeks, as confirmed by two sources familiar with the interviews. These sources requested anonymity due to not being authorized to discuss the matter publicly.

Legal scrutiny for Faraday Future began shortly after its public debut in July 2021.

Concerns Raised Post-Merger

Following the SPAC merger, newly appointed board members expressed concerns regarding potentially misleading public statements made by Faraday Future. They also questioned the extent of control exercised by Jia Yueting over the company’s operations.

Furthermore, these board members were troubled by financial transactions between the company and entities linked to Jia.

Internal Probe and SEC Subpoenas

An internal investigation was initiated, involving a prominent law firm and forensic accounting specialists. This probe substantiated the board’s concerns. Consequently, Jia was removed from a leadership position, and Wang, Jia’s nephew, resigned after declining to cooperate with the investigation.

The findings of the internal probe were shared with the SEC, which subsequently issued subpoenas to Faraday Future in March 2022. Around the same period, the Department of Justice also commenced its own investigation, the current status of which remains unknown.

Ongoing Investigation and Leadership Changes

The SEC investigation, spearheaded by its Los Angeles enforcement office, has been ongoing for three years. Faraday Future has periodically disclosed receiving subpoenas, but the possibility of enforcement action remained unclear until the recent filing.

During the investigation, Jia Yueting regained a leadership role within Faraday Future.

Power Struggles and Threats

In 2022, board members faced pressure from FF Global, a major shareholder group with ties to Jia, seeking increased control. FF Global specifically targeted Brian Krolicki, a board member, with an offer of up to $700,000 to resign from his position, offered by Matthias Aydt, Faraday Future’s current co-CEO alongside Jia.

Later in 2022, several board members began receiving death threats. Ultimately, all of them resigned as FF Global secured financing to sustain the company.

Recent Vehicle Deliveries and Allegations

In 2023, Faraday Future began delivering its electric SUV to customers. However, multiple whistleblowers have alleged that these sales are misrepresented and misleading. Jia Yueting was appointed co-CEO in April of the same year.