EV startup Workhorse faces Department of Justice probe

According to The Wall Street Journal, the Department of Justice opened an investigation into Workhorse's struggling electric vehicle startup. According to The Wall Street Journal, the probe is being conducted by the US Attorneys Office for the Southern District in New York. This office often investigates financial crime.
Workhorse is currently under investigation by the Securities and Exchange Commission. This first came to light when Fuzzy Panda, a short-selling research company, published a report accusing the EV startup with fraud. This is the third EV startup being investigated by both agencies. Nikola, whose founder was also indicted for fraud earlier this year, and Lordstown Motors, with which Workhorse shares deep ties, are also under investigation. After Hindenburg Research published reports filled to the brim with fraud allegations, both of these startups were placed under investigation.

This Ohio-based startup makes commercial electric delivery vehicles. It has struggled tremendously over the past few years, as it tried to win, but lost, the contract to build the next generation mail truck for the United States Postal Service. Oshkosh Defense was awarded the contract. Workhorse protested against the decision at the US Court of Federal Claims in January, but was abruptly dismissed by the lawsuit in September.

Workhorse also experienced problems with its flagship vehicle, C-1000. The company finally put it into production in August. However, it immediately stated that it had to redesign the van. It stopped shipping them and returned all 41 of the ones that were delivered in September. Recent turnover has also occurred in the startup executive ranks, with Duane Hughes leaving as CEO in July and Steve Schrader departing as CFO in October.

Fuzzy Panda published a September report alleging that Workhorse had lied about some orders it had received for its delivery vehicle. It also suggested that Workhorse may have committed accounting fraud.

Workhorse survived largely on loans from hedge funds throughout all the turmoil. It has pledged a large portion of its intellectual property as collateral to those loans and could lose a lot if it defaults.