(Bloomberg) — Faraday Future Intelligent Electric Inc., the electric-vehicle startup that shook up its executive ranks last month, said a recently completed internal investigation found that its leaders didn’t demonstrate “a commitment to maintain integrity and ethical values.”
This “material weakness” in financial reporting was disclosed in the company’s Form 10-Q for the third quarter of 2021, which was filed late Friday. That was the deadline for Faraday Future to submit the document to the US Securities and Exchange Commission or risk being delisted from the Nasdaq.
The startup in April limited the role of its founder, Jia Yueting, after completing the probe into allegations of fraud; at the time, Faraday Future said another vice president resigned and that it fired some other employees who weren’t executive officers. Its chairman stepped down into a lesser role on the board in February. The internal probe was launched in late 2021 after a short-selling research firm claimed Faraday Future misrepresented SUV preorders following its merger with a special purpose acquisition company.
In Friday’s filing, Faraday Future said senior managers “failed to reinforce the need for an attitude of compliance and internal control awareness with certain of FF’s governance, accounting and finance policies and procedures.” Those failings led to “inaccurate and incomplete disclosures of certain relationships, arrangements, and transactions,” the Los Angeles-based company said.
Faraday Future didn’t explain what transactions it was referring to and didn’t respond to follow-up questions. A person familiar with the matter told Bloomberg News that it has to do in part with how founder Jia moved money into and out of the startup over the years. Jia didn’t immediately respond to an email seeking comment.
Jia built a technology empire in China before relocating to the US in 2017. He often issued loans to Faraday Future from other companies he controlled in China, the US and offshore jurisdictions, according to documents filed with the SEC and his personal bankruptcy, as well as other reports.
The startup’s investigation concluded that some employees withheld “their relationships with certain related parties and affiliated entities in connection with, and following, the business combination, and failed to fully disclose relevant information, including but not limited to, information in connection with related parties and corporate governance to the Company’s independent registered public accounting firm PricewaterhouseCoopers LLP.”
“Further, certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation,” the company wrote in the filing.
Faraday Future shares have lost about 90% of their value since closing at a 52-week high of $16.54 in late June.
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