After the Justice Department released a trove of new documents related to notorious sex offender Jeffrey Epstein, journalists scrutinizing them discovered extensive ties to Silicon Valley.
TechCrunch’s Sean O’Kane examined how a mysterious businessman named David Stern developed a relationship with Epstein to pitch him investments in several electric vehicle startups, including Faraday Future, Lucid Motors, and Canoo.
In the latest episode of the Equity Podcast, Kirsten Kolosek and I talk to Sean about what he learned and discuss whether the Epstein revelations will have broader implications for Silicon Valley.
You can read a preview of the conversation, edited for length and clarity, in the transcript below.
Sean: There are always people on the fringes who don’t necessarily want to be at the center of the investment scene. That’s why I started looking into these files. One of the reasons for that is because if you flash back to a long time ago, especially 10 years ago, there was a lot of Chinese investment in this space.
This was before the rush of EV startups in China that we see today. […] There was a moment in self-driving cars, especially electric cars, when Chinese investors, Chinese companies, and state-owned automakers wanted nothing more than to be seen as Silicon Valley startups. So they came here and invested in companies and helped them get started and in some cases set up offices in Silicon Valley.
Many of the companies I have covered over the years were born in this environment. We never had a complete picture of how many of them were funded.
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In particular, this company called Canoo, now bankrupt and out of business, had perhaps the most mysterious group of investors. They weren’t upfront about this when they first started coming out of stealth in early 2018. And frankly, it took a lawsuit between several people close to the company’s top management to reveal the investors.
At the time, he was relatively close to the Chinese businessman, who was like the fourth-highest ranking Communist Party official under China’s former leader, and the son-in-law of a Taiwanese electronics giant. And then there was this really weird guy named David Stern, who was the third founding investor. And there was almost no information about this man.
At the time, we learned that he was some sort of German businessman with some connections to China, but it wasn’t very clear how he was involved. The only thing I really remember hearing at the time was that he was close to Prince Andrew. I thought that was very strange. This idea that someone even mentioned to me a long time ago, probably in 2018 or 2019, was that Prince Andrew was somehow involved in this company, Canoo, perhaps not investing, but advising or something.
It was obviously something that had been stuck in my head for a very long time. Because we assumed that being close to Prince Andrew meant being close to someone like Epstein, and we started looking for that information as more of these files came out.
And that was more true here than I ever imagined. Because this guy named Stern has gone from being a mystery and a ghost from a decade ago to someone who was present in the middle of all this trading, and over the course of about a year and a half, he’s seen pitching an investment in Faraday Future, convincing Epstein to put perhaps hundreds of millions of dollars into that company, and trying to buy out the 30% stake that the Faraday Future founder had bought or acquired in Lucid. I feel that this is the dynamics that was overlooked at the time when motors were introduced. [in] How those companies grew back then, and then with Canoo as well.
Epstein never invested in these companies despite being so close, but this was a real revelation. And as I got into it in an article I wrote last week, it gives you a rough idea of Mr. Stern’s 10-year relationship with Mr. Epstein, when Mr. Stern first approached Mr. Epstein, hat in hand, in 2008, introduced himself, and said, “I want to invest in China. Will you put some money in it?” To someone who seemed to be very close to him until the end.
Kirsten: All in all, it’s very interesting and goes back to my original comment about how having the opportunity to look back at how a deal was unfolding with new information can really change your perception and perspective at the time.
And for those who didn’t follow quote-unquote “mobility,” think of this as how we think about physical AI these days. everyone was talking about it. Every automaker wanted to realize the “future of transportation” and “mobility,” without quote. So it makes a lot of sense that these more secretive types of people also got involved.
Sean, one of the things that you brought up to me when I was working on the story with you was, in terms of editing, you were like, “You know what? [saying]it was very clear that Epstein and David Stern were not actually looking to invest or start a company. It was all about how to make the most money the quickest. And this is something that’s really important and interesting historically, in addition to all the horrible, horrible, horrible things that he did to humans. [Epstein] I was also a complete operator in order to make money as quickly as possible. And we see that in these emails and communications between David Stern and Epstein.
Sean: Yeah, on both counts, we start the story the moment Lucid Motors shows up. […] They were basically a battery supplier for a long time, but then they pivoted to the passenger car startup that we know today. But at the time, they were having a really hard time raising Series D funding, and they really needed that money to start producing their first electric sedan.
The main reason they were struggling behind the scenes was because Arrival’s founders had secretly amassed this large amount of stock and in some ways alienated people and in some ways made the company seem like an uninvestable company, but all that hype at the time was creating opportunities for people like Stern and Epstein. And then Stern comes to Epstein and basically says, “I heard you’re raising money. Can I get some information from Morgan Stanley?” They can be seen talking over email.
Epstein turned around and gave that information back, and then we see the argument that Morgan Stanley said that it had offered Lucid Motors something like an investment offer, an acquisition offer to Ford. [and] It was going to be in Series D. And they are fragmented – can you invest in this and get big returns in the future? Or, if you can get this stock now at a fire sale price, will you sell it when Ford joins the company in a few months?
In the end, they didn’t do it, but Stern eventually invested in Canoo and helped launch the company.
Anthony: One thing — and maybe a little bit removed from specific industries and investments — but it’s also important context that’s commonly mentioned in any of these articles about Epstein in Silicon Valley, is that it’s worth repeating here. [pleaded] In 2008, she was found guilty of soliciting prostitution from a minor.
Almost all emails talked about in these articles [and] Most other stories about Silicon Valley’s Epstein happen after that. So this is partly a story about how people get used to the idea that this guy already has a pretty shady past. He was not the notorious criminal he eventually became. [became]However, there was something already known about him, and he was a source of connections with power, celebrity, and money, so many tried to ignore it.
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