Faraday Future May Encounter SEC Enforcement Action After Three-Year Investigation

The Securities and Exchange Commission (SEC) has sent letters to Jia Yueting, founder of Faraday Future, and president Jerry Wang, signaling they may face enforcement actions following a three-year investigation into fraud.

These communications, known as “Wells Notices,” inform the two executives that the commission’s staff has internally recommended enforcement actions against the electric vehicle company, the executives, and two unnamed former employees, according to a regulatory filing released on Wednesday.

As stated in the filing, Faraday Future noted that the SEC is focusing on “alleged false and misleading statements” related to the company’s merger with a Special Purpose Acquisition Company (SPAC) in 2021. The SEC may seek “an injunction or cease-and-desist order against future violations of federal securities laws, civil monetary penalties, disgorgement, or other appropriate relief within the Commission’s authority, or any combination thereof,” as outlined in the document.

The company indicated that they—together with Jia and Wang—“plan to engage with the Commission staff to argue that enforcement action is not justified.” A spokesperson for Faraday Future has yet to respond to requests for comment, nor have Jia and Wang.

According to two unnamed sources familiar with the situation, who spoke on the condition of anonymity, TechCrunch has learned that the SEC has recently performed several depositions with former employees of Faraday Future.

Concerns regarding potential legal issues for Faraday Future began to surface almost immediately after its public listing in July 2021.

During the SPAC merger, several new board members, previously uninvolved with the company, raised alarms about potential misrepresentation to investors and questioned the extent of Jia’s control over Faraday Future. They also highlighted concerns regarding the flow of funds between the company and entities associated with Jia.

The board initiated an internal investigation, retained a prestigious law firm and forensic accounting team, and ultimately determined that the concerns were substantiated. Consequently, Jia was sidelined, and Wang (who is Jia’s nephew) resigned after refusing to cooperate with the investigation, according to SEC filings. The directors involved in the internal probe shared much of their findings with the SEC, leading the agency to issue subpoenas to Faraday Future in March 2022. Concurrently, the Department of Justice also commenced an investigation into the company, though the current status of the DOJ inquiry remains unclear.

This SEC investigation, which TechCrunch understands has been spearheaded by the commission’s Los Angeles enforcement office, has been active for the past three years. Although Faraday Future has periodically mentioned receiving ongoing subpoenas, it remained uncertain until Wednesday’s filing whether the commission would actually pursue enforcement actions.

During the course of the investigation, Jia resumed his role as the leader of Faraday Future.

In 2022, the board faced significant pressure from an external group and major shareholder faction known as FF Global—linked to Jia—that attempted to exert more control over the board. FF Global explicitly targeted board member Brian Krolicki. Matthias Aydt, currently co-CEO along with Jia, even proposed compensating Krolicki up to $700,000 to resign.

By late 2022, several board members began receiving death threats, leading to their eventual resignations as FF Global agreed to provide critical financing to keep the company afloat.

In 2023, Faraday Future finally delivered its long-awaited electric SUV to its initial customers, though multiple whistleblowers have alleged that those sales are misleading and deceptive. Regardless, in April of this year, Jia was appointed co-CEO.