Faraday Future admits to SEC that disclosure was inaccurate, incomplete

On May 12, electric car startup Faraday Future reshuffled its management last month. Faraday Future said in Friday’s filing that a recently completed internal investigation found that the company’s disclosures were inaccurate and incomplete, and that management had not demonstrated a “commitment to upholding integrity and ethical values.”

Faraday Future disclosed the “material deficiency” in its third-quarter 2021 financial statements filed late Friday. That day was the deadline for Faraday Future to file its quarterly reports with the Securities and Exchange Commission (SEC) or risk being delisted from Nasdaq.

In April, after completing an investigation into allegations of fraud, Faraday Future limited founder Jia Yueting ‘s substantial role at the company. Faraday Future also said at the time that another vice president had resigned and that some non-executive employees had been fired, and the company’s chairman also resigned from other positions on the board in February.

Faraday Future launched an internal investigation in late 2021 after a short-seller alleged that Faraday Future misreported electric car reservations after it merged with a special-purpose acquisition company.

In a filing on Friday, Faraday Future said company executives “failed to reinforce the need for compliance attitudes and internal control awareness through Faraday Future’s governance, accounting, and financial policies and procedures,” and that these failures resulted in “a sense of Inaccurate and incomplete disclosures of these relationships, arrangements and transactions”.

Faraday Future did not explain exactly which transactions were involved in the document, nor did it respond to follow-up questions. A person familiar with the matter said that the relevant transaction is partly related to Jia Yueting’s capital inflows and outflows over the years. Jia Yueting did not immediately respond to a request for comment.

SEC filings, Jia Yueting’s personal bankruptcy records and other reports show that he regularly made loans to Faraday Future from other companies he controlled in China, the United States and offshore jurisdictions.

Faraday Future’s investigation concluded that some employees concealed “their relationship with certain related parties and related institutions before and after the business combination, failed to fully disclose relevant information, and failed to fully disclose relevant information to PricewaterhouseCoopers, an independent certified public accounting firm. Disclose information related to related parties and corporate governance.”

“In addition, certain individuals were uncooperative and withheld potentially relevant information related to the special committee’s investigation,” Faraday Future said in the filing.

Faraday Future shares have fallen about 90% since closing at a 52-week high of $16.54 in late June. (chenchen)