Things are not looking any better for electric vehicle (EV) maker Faraday Future (FF) now that its CEO and co-founder, also LeEco’s Founder, defied an order from Chinese authorities to come back and explain himself for his lack of financial performance. Jia Yueting was once portrayed as a rising Chinese star (and billionaire) potentially following in the footsteps of Elon Musk.
Jia Yueting Skips Out On Chinese Authorities
It seems things are not on the upswing for Faraday Future now that its main investor and CEO hasn’t reported to Chinese authorities to explain his lack of financial performance with the Shenzhen Leshi Internet Information & Technology Corp.
It also doesn’t bode well for Jia Yueting, who has now been listed as persona non grata by the China Securities Regulatory Commission (CSRC). What this means is that Jia Yueting is now on China’s national blacklist of “discredited” people. He may no longer stay at high-end hotels, nor send his children to private schools in China. He also faces penalties and travel bans.
Everything started when the interest-free loans to the Leshi Internet Information & Technology Corp didn’t return their promised yields. In April 2017, its shares were suspended from trading. Jia Yueting was ordered to return to China by December 31 to explain himself but skipped out. His wife, Gan Wei, returned alone.
Jia Yueting borrowed against his 26% shares in the Leshi Internet Information & Technology Corp. and hasn’t paid them back, leaving the company in limbo. Jia borrowed to finance LeEco’s new international ventures in smartphones and his electric car business, presumably involving Faraday Future. Jia resigned as CEO of the Leshi Internet Information & Technology company this past year when the financial challenges starting coming to light. He also cut his pay own pay at LeEco to a nominal fee of 1 yuan (~15 cents).
China Keeps Its Companies & Citizens In Check
China has been very active lately to make sure its corporations don’t get involved with financial scandals. Although the Chinese government controls many state-owned corporations, it is also eager to nip in the bud any systemic financial risks from private companies. So far, the Chinese government has come down hard on the Wanda Group, Anbang Insurance Group, HNA Group, and Fosun International via the banking regulatory commission.
Jia Yueting wanted to build an empire that would rival Netflix, Tesla, + Apple. It all started with the acquisition of US television maker Vizio for $2 billion. But the founder soon admitted running into financial problems.
How serious is this? Very serious. Under current Chinese law, Jia Yueting could forcibly be repatriated to China and face criminal liability, according to the South China Morning Post.
Is This The End Of Faraday Future?
A few weeks ago, we wondered about the future of Faraday Future and if it could be any more uncertain than it has been. Although we welcomed the news of two startups created with ex-employees, it seems this latest setback with Jia Yueting, Faraday Future’s last investor still fighting for the company, could be a fatal blow.
As of January 1, Jia Yueting’s whereabouts were unknown. LeEco has declined to comment.