Faraday Future has been up to no good. Seven months after the company’s IPO, it’s come to light the company lied about the number of preorders it received for its “upcoming” FF 91 EV. Bloomberg reports after an internal investigation found the inflated preorders to be true, Faraday’s board chairman and two other executives are leaving the company.
Many had already been side-eyeing the company and its claims, but things really came to head a few months back. Last summer, Faraday went public after merging with Property Solutions Acquisition Co. The resulting merger generated $1 billion in gross proceeds for the company. The company also claimed that it had… reservations. The exact number is hard to pin down. Most things you’ll read number initial reservations of the FF 91 at 64,000. More recent things add another 14,000 reservations for the Futurist version of the FF 91, a model that’s supposed to be coming this year.
A few months after the IPO, short-seller J Capital Research dropped a scathing report on Faraday, saying “EV for Faraday Spells Embellzment Vehicle,” pretty much calling the EV startup a scam. J Capital also called out its fake reservations, a comparison they made to Lordstown Motors, another startup that faked reservations. It seems though there may have something to the report because it was enough to get the company to take a look at its own numbers. Surprise, surprise, the company found that of the 14,000 recent reservations, just a few hundred were actually reservations with deposits, the others were just interested customers. From Bloomberg:
...its claims to have more than 14,000 reservations for its FF 91 model were “potentially misleading,” Faraday Future said. Only several hundred were paid, while the rest were “indications of interest.” The probe also found some investors had been misled about the involvement of founder and former Chief Executive Officer Jia Yueting in day-to-day management.
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The company issued a meaningless statement, saying that its “corporate culture failed to sufficiently prioritize compliance.” I think the idiom of the left hand doesn’t know what the right hand is doing applies here. Because of these lies, three executives have parted ways with the company. Chairman of the board Brian Krolicki has stepped down; the company’s VP, General Counsel, and Secretary Jarret Johnson is also out. Another executive, VP of Global Capital Markets Jiawei Wang has been suspended without pay. It’s unknown whether or not the fact that these individuals seperating from the company had anything to do with the inflated reservation numbers.
Update: This article previously incorrectly stated that Brian Krolicki was CEO of Faraday Future. Brian Krolicki was chairman of the board. The CEO of Faraday is Carsten Breitfeld who has not been asked to resign.