Faraday Future Founder Files For Chapter 11 Bankruptcy After Racking up $3.6B in Debt
Despite the staggering debt, the company will continue to operate in the United States as it prepares for an IPO.
Faraday Future founder and former CEO Yeuting Jia filed for Chapter 11 bankruptcy and restructuring in a Delaware court Monday afternoon. The EV startup’s former head honcho filed for the protection after racking up approximately $3.6 billion in personal debt in China. According to the startup, however, this action will not affect company stock owned by employees or other investors.
According to various reports, this doesn’t come as a huge surprise given that Jia has a rife history of accumulating debt. He reportedly moved to the United States for his newest ventures after being blacklisted in China on the country’s official national debtor database as someone who’s known to owe a lot of people a lot of money.
“The Founder and CPUO of Faraday Future, Yueting Jia(YT), has filed for bankruptcy and restructuring under Chapter 11 in the United States, this was done to address his personal debts in China,” the company announced in its official statement earlier this morning. But the company said that it will continue to operate as normal as it prepares for an initial public offering.
Jia’s practices began to catch up with him while he tried to get Faraday Future off the ground after the company posted a massive $477 million loss in 2018. Since its establishment, the company gained a reputation for digging up a lot of investment cash from a variety of parties, only to post massive losses around $2.15 billion to date.
Jia also stepped down as the CEO just last month with former BMW executive Carsten Breitfeld taking his place. But while Jia stepped down from his leadership role, his large ownership stake of Faraday Future still meant that he had a considerable amount of skin in the game.
As a possible solution before litigating his case in court, Jia reportedly offered to pay off his debts by surrendering his ownership shares in Faraday Future through a trust equivalent value to his stake. But the trust would only payout to the creditors that Jia owes money to only if Faraday’s IPO continues as planned. Since March of this year, Faraday Future’s been working with Birch Lake Associates, a restructuring firm that loaned the company $15 million upon agreeing to work together.
But should the plan fall through, Jia’s failure to reach an agreement with his creditors could potentially force him to liquidate all of his assets and drive Faraday Future into the ground for good.