SEC investigates Faraday Future as regulatory crackdown on EV SPACs continues

According to a securities filing, executives at the company have been subpoenaed by the SEC as part of an investigation into inaccurate statements made to investors.

The corporate culture of the company failed to sufficiently prioritize compliance and employees made inaccurate statements to investors, according to a regulatory filing. The internal probe led to a new board, pay cuts for two executives and the suspension of at least one.

The SEC is investigating matters for Faraday Future. It is the latest in a string of investigations by the SEC into EV startups that have gone public via a merger with a blank check.

Merging with a SPAC was a hot topic in the public markets in 2020. The capital needed to develop and build EV at scale was the focus of a string of electric vehicle startups. The SEC has begun investigations into at least a half dozen of them.

Since its founding, the company has had a lot of controversy. It became a publicly traded company in July of 2021.

A few months after the merger, a short-seller report said that the company had made a number of inaccurate statements. An internal review conducted by a special committee of directors tapped the expertise of a forensic accounting firm and independent legal counsel.

The committee found that company employees overstated the involvement of the founder and former CEO. The company's declaration that it had received more than 14,000 reservations for the FF 91 vehicle was potentially misleading because only a few hundred of those reservations were paid, and the rest were not indications of interest. The reviewers found that the company's internal controls over financial accounting and reporting need an upgrade.

The committee took a number of actions, including cutting the pay of the CEO. In order to become a member of the audit and compensation committees of the board, Brian had to step down from his role as chairman of the board and chair of the nominating and corporate governance committee. The company's VP of Global Capital Markets, Jerry Wang, and general counsel and secretary, Jarret Johnson, left the company.

In the new filing, the company said it continues to implement the appropriate actions approved by the internal committee.

The annual report for the year ended December 31, 2021, is not expected to be filed because of the internal investigation.