The Securities and Exchange Commission (SEC) has sent letters to Faraday Future founder Jia Yueting and president Jerry Wang, alerting them that they may soon face enforcement actions from the agency as the result of a three-year fraud investigation.
The letters, known as “Wells Notices,” state that the commission’s staff has made an internal determination to recommend an enforcement action against the electric vehicle company, the two executives, and two former employees who weren’t named, according to a regulatory filing published Wednesday.
Faraday Future wrote in the filing that the SEC is focused on “purported false and misleading statements” related to the company’s 2021 merger with a special purpose acquisition company (SPAC). The SEC may seek “an injunction or cease-and-desist order against future violations of provisions of the federal securities laws, the imposition of civil monetary penalties, disgorgement or other equitable relief within the Commission’s authority, or any combination of the foregoing,” according to the filing.
The company also said in the filing that they — along with Jia and Wang — “plan to engage with the Commission staff about why an enforcement action is not warranted.” A spokesperson for Faraday Future did not immediately respond to a request for comment. Jia and Wang did not immediately respond to requests for comment either.
TechCrunch has learned that the SEC has conducted multiple depositions in recent weeks with former employees of Faraday Future, according to two people with knowledge of the interviews, who were granted anonymity because they were not authorized to speak about them.
But this potential legal trouble started brewing for Faraday Future almost immediately after the company went public in July 2021.
As part of the SPAC merger process, the company brought on a handful of new board members who were not previously related to the company. Those board members became concerned that Faraday Future had not only made misleading statements to the investing public but also that it was concealing the amount of control that Jia wielded over the company. What’s more, the members were concerned about the way money was flowing between the company and entities connected to Jia.
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The board launched an internal probe, hired a high-powered law firm and forensic accounting firm, and ultimately determined that all of those things were true. They sidelined Jia as a result, and Wang (who is Jia’s nephew) resigned after refusing to cooperate with the probe, according to SEC filings. The directors who ran the internal probe handed over a lot of that information to the SEC, which sent subpoenas to Faraday Future in March 2022. Around that same time, the Department of Justice also started probing the company. (The current status of the DOJ inquiry is unknown.)
That SEC investigation, which TechCrunch has learned has been led by the commission’s Los Angeles enforcement office, has been chugging along for the past three years. Faraday Future has occasionally disclosed receiving successive subpoenas, but it was unclear until Wednesday morning’s filing whether the commission would pursue an enforcement action.
While the investigation was ongoing, Jia re-established himself as the leader of Faraday Future.
In 2022, the directors were subjected to immense pressure as an outside entity and major shareholder group called FF Global — which had connections to Jia — attempted to gain more power over the board. FF Global took particular aim at one board member, Brian Krolicki. Matthias Aydt, who is currently Faraday Future’s co-CEO along with Jia, even offered to pay Krolicki up to $700,000 if he would step down.
By late 2022, some of those board members started receiving death threats. All of them ultimately stepped down as FF Global agreed to line up much-needed financing to keep the company alive.
In 2023, Faraday Future finally put its long-promised electric SUV into the hands of its first customers, although multiple whistleblowers have claimed those sales are fake and misleading. Nonetheless, Jia was named co-CEO in April of this year.
