Faraday Future Lawsuit Claims Former CFO Stole Trade Secrets and Employees for New Startup

Startup Evelozcity claims the charges are baseless.

byStephen Edelstein| PUBLISHED Jan 30, 2018 12:05 PM
Faraday Future Lawsuit Claims Former CFO Stole Trade Secrets and Employees for New Startup

The ongoing saga of Faraday Future has taken a bizarre turn. The company is suing former CFO Stefan Krause, claiming Krause stole trade secrets and encouraged employees to follow him to a new electric-car startup in his final days at Faraday. After a year of watching the legal drama between Waymo and Uber play out, it seems Silicon Valley has another trade-secrets case on its hands.

Krause's startup, Evelozcity Inc., is named as the only defendant in the suit, which was filed Monday in Central California District Court. But Faraday is also pursuing arbitration against Krause and former CTO Ulrich Kranz, according to The Verge, which first reported the suit. Evelozcity denies the accusations.

Krause resigned from Faraday in October, one of a number of Faraday executives to leave over the past few months. But the lawsuit alleges he didn't leave until early November. Jalopnik previously reported that Krause tendered his resignation in October, and that hours later an internal email from Chinese tech entrepreneur and main Faraday financier Jia Yueting discussing Krause's "termination" circulated. Faraday then issued a fiery statement accusing Krause of "malfeasance and dereliction of duty."

The statement confirmed that Krause left Faraday in October, but now the company claims he stayed into November, and that he started setting up Evelozcity while he was still a Faraday employee. Incorporation documents and website registration for Evelozcity were filed Nov. 7, according to the suit, but little else is known about the company. The lawsuit alleges that Krause asked Faraday's human-resources director to "backdate his resignation" by about two weeks to cover his tracks.

During the time in dispute, Faraday alleges that Krause and Kranz "began covertly soliciting a large number of FF employees, including several key executives and technical personnel," for Evelozcity. Faraday also claims that Krause and Kranz encouraged these employees to steal trade secrets as part of a deliberate plan to "harm FF and to give Evelozcity an unfair advantage."

While he isn't named as a defendant, the lawsuit also claims that former Faraday executive Bill Strickland "appears" to have copied thousands of confidential electronic documents from Faraday computers, and claims he stole the documents "at the encouragement and direction of Evelozcity." The lawsuit makes similar claims at two other former Faraday employees who have gone to work at Evelozcity--Christoph Kuttner and Sohel Merchant--but they are not named as defendants in the suit either.

More broadly, Faraday argues that the mission statement on Evelozcity's website—to "design, develop, and deliver the most competitive, capable, connected, and clean mobility device for the next generation"—shows the company's purpose "is to compete directly with FF." 

In a statement, Evelozcity denied the charges and accused Faraday of mudslinging. 

"We do not have, nor do we need, any technology from Faraday Future. The complaint continues Faraday's pattern of hurling false and inflammatory accusations against us. We will respond to the many recklessly inaccurate allegations in this desperate lawsuit at the appropriate time," the company statement said.

Faraday also used the lawsuit to rebut claims by Krause and Kranz that cash-strapped Faraday couldn't secure additional funding unless Jia stepped down, calling those claims "false." Jia, who is now CEO, claims to have secured $1 billion in funding for Faraday, but the company has declined to offer details. Jia was placed on a Chinese debtors "blacklist" and has refused calls from the government to return home and address his debts.