The Securities and Exchange Commission (SEC) has written to future founders of Faraday, President Jia Yueting and Jerry Wang, warning that they could soon face enforcement action from the agency as a result of a three-year fraud investigation.
The letter, known as the “Wells Notice,” says a regulatory filing issued Wednesday that committee staff have made an internal resolve to encourage enforcement action against the electric vehicle company, two executives and two former employees who were not named.
Faraday Future submitted that the SEC is focusing on “false and misleading and misleading statements” related to the 2021 merger with the Special Purpose Acquisition Company (SPAC). The SEC may seek “an injunction or termination order against any future violation of the provisions of the Federal Securities Act, civil monetary penalties, the imposition of disgust or other impartial relief within the authority of the Commission, or any combination of the foregoing.”
The company also said, along with Jia and Wang, they have submitted “plans to work with committee staff on why enforcement measures are not justified.” A Faraday Future spokesman did not immediately respond to requests for comment. Jia and Wang also did not immediately respond to requests for comment.
TechCrunch has learned that the SEC has made multiple deposits in recent weeks with former Faraday Future employees, according to two people with knowledge of the interview.
However, this potential legal issue began brewing for Faraday’s future shortly after the company was opened in July 2021.
As part of the SPAC merger process, the company brought in a small number of new board members that were previously unrelated to the company. These board members have become concerned that Faraday’s future not only issued misleading statements to the investment public, but also hid the amount of control Jia has given to the company. Additionally, members were concerned about the way money was flowing between the company and the entities associated with the JIA.
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The board launched an internal investigation, hired strong law firms and forensic accounting firms, and ultimately determined that all of them were true. They then sidelined Jia, and the king (Jia’s nephew) resigned after refusing to cooperate with the investigation, according to SEC submissions. The director who performed the internal probe handed over much of the information to the SEC. (The current status of the DOJ inquiry is unknown.)
The SEC investigations learned by TechCrunch, which has been led by the committee’s Los Angeles Executive Office, have been running for the past three years. Faraday Future has sometimes disclosed receiving consecutive subpoenas, but it was unclear until Wednesday morning submitted whether the committee would pursue enforcement action.
While the investigation was underway, Jia reestablished herself as Faraday’s future leader.
In 2022, the directors sought to gain more power than the board as a major shareholder group (with connections to JIA) with external entities. FF Global was particularly aiming to be one board member, Brian Krolicki. Now along with Faraday Future’s co-CEO and JIA, Matthias Aid has even offered to pay Chloricki up to $700,000 if he resigns.
By the second half of 2022, some of these officers had begun receiving death threats. They all resigned as FF Global agreed to line up much needed funding to keep the company alive.
In 2023, Faraday Future ultimately put the long-standing electric SUV into the hands of its first customer, but several whistleblowers have argued that these sales are fake and misleading. Nevertheless, JIA was appointed CO-CEO in April of this year.
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