Automotive

The War Between Faraday Future and Its Ex-CFO Is Somehow Getting Even Uglier


Faraday Future and Evelozcity have been legally feuding for months.
Photo: Jae C. Hong (AP)

Even as electric car startup Faraday Future has been inching closer to making a production car, its ongoing legal skirmish with a former executive is continuing to get worse. On Thursday, the former executive’s new startup sued Faraday, claiming its employment agreements violate California state law by preventing employees from seeking work elsewhere. But the complaint also paints a harsh picture of day-to-day life at Faraday.

Faraday’s rocky four-year history has been well-documented, but the 20-page complaint from electric car startup Evelozcity accuses Faraday of luring employees to the company on false promises and requiring them to sign employment agreements with a so-called “non-solicitation provision” that makes them ultimately feel reluctant to leave the company.

“On its face, this clause disallows departing FF employees from directly or indirectly soliciting other FF employees to join another company for a twelve-month period,” the complaint, filed in Los Angeles County Superior Court, states. “However, FF initially drafted and has subsequently come to interpret and enforce this agreement beyond the bounds of California public policy.”

Citing an “ever-expanding list of Evelozcity employees” that Faraday is allegedly targeting, the startup claims that “it appears to be FF’s position that if anyone associated with Evelozcity discusses employment at Evelozcity with any FF employee, each and every former FF employee now at EVelozcity is in violation of the non-solicitation provision.”

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Evelozcity’s CEO, Stefan Krause, has a loaded history with Faraday and its CEO, Jia Yueting. Faraday hired Krause in early 2017, as the startup was struggling to remain financially viable. Krause set out to raise $1 billion for Faraday’s project and lured Ulrich Kranz, another former BMW exec, to Faraday as chief technology officer. But despite speaking with more than two dozen possible suitors, he found no takers, Jalopnik previously reported.

By October, he’d left the company. After Krause confirmed his departure to Jalopnik, Faraday issued an extraordinary statement, accusing him of “malfeasance,” and tried to claim that it, in fact, had fired Krause. The company later sued Krause, claiming he stole trade secrets and employees. Krause denied the allegations and that case is pending.

Faraday didn’t immediately respond to a request for comment. Evelozcity declined to comment.

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Krause wanted to take Faraday into bankruptcy, but was ultimately shot down by Jia, and Evelozcity’s suit expanded on Jia’s position.

“YT viewed talk of bankruptcy as treason,” the complaint alleged. “In fact, YT actively hindered Chapter 11 preparations despite his many business advisors pleading otherwise. YT would rather have the company fail, leaving stranded employees and suppliers owed large sums of open, unpaid debts, than restructure the company’s finances and publicly evidence the shortcomings of FF and himself.”

The startup’s lawsuit also offers a stark picture of what life was like in Faraday’s office as it struggled to keep the lights on. For example:

Once there, they observed a number of alarming and disturbing realities that proved FF was far from the company that was originally represented. Instead of building a cutting edge technology company, employees routinely spent their days fending off calls from creditors and strategizing about which bills to pay to avoid bankruptcy. By the fall of 2017, FF regularly depleted its bank account and required infusions of cash on a biweekly basis just to make payroll, as the company had become both illiquid and insolvent.

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Jia recently announced an investment of $2 billion from Evergrande Health, a subsidiary of Chinese real estate giant Evergrande Group, which reportedly acquired a 45 percent stake in the startup for $2 billion. But Evelozcity alleges that Faraday isn’t even using this influx of cash to “further product development,” claiming that it’s instead trying “to intimidate current employees and thereby discourage them from departing for Evelozcity, among other opportunities.”

The alleged enforcement of Faraday’s non-solicitation cause has created a “chilling effect” in the small EV industry, Evelozcity alleges.

“This chilling effect is particularly pronounced due to the small industry and limited number of alternate employment options available to these specialized employees, and is felt by the FF employees and EVelozcity, alike,” the complaint claims.

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The lawsuit asks for injunctive relief and a declaration that Faraday’s non-solicitation clause is unenforceable under California law.

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