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Faraday Future claims former CFO stole trade secrets and employees in explosive new lawsuit

Faraday Future claims former CFO stole trade secrets and employees in explosive new lawsuit


The company is making serious claims about a number of former employees

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Photo: Faraday Future

Faraday Future claims that former CFO Stefan Krause solicited employees to follow him to a new project in his final days with the company, and that his new startup may have been involved in the theft of trade secrets, according to a new lawsuit filed today in Central California District Court.

The lawsuit names Krause’s startup, Evelozcity, Inc., as the only defendant. But Faraday Future is pursuing arbitration against Krause and former CTO Ulrich Kranz via JAMS Century City Resolution Center, according to an internal staff email sent today that has been obtained by The Verge.

A company spokesperson for Faraday Future merely confirmed that the lawsuit has been filed, but offered no additional comment at this time. A representative for Evelozcity, Krause’s new company, sent the following statement:

We do not have, nor do we need, any technology from Faraday Future. This 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.

Krause left Faraday Future in October, according to multiple sources and previous reports. But the company maintains he was fired in November, a case that it first revealed in a fiery statement that claimed Krause was guilty of “malfeasance and dereliction of duty.” In that statement, the company promised it was pursuing legal action against Krause. But no such action surfaced in the time between then and now.

Today’s lawsuit is the closest Faraday Future has come to following through on that promise. The lawsuit claims Krause was “secretly” working at both Faraday Future and Evelozcity for a period of a few weeks. It states in the lawsuit that incorporation documents for Evelozcity and the registration of the company’s website were filed on or about November 7th, but claims that Krause was still employed with Faraday Future at this time.

The company says that Krause asked the Faraday Future’s HR director to “backdate his resignation” by about two weeks in order to cover this up — a claim that clashes with the company’s original position in stating that Krause was fired, as well as accounts given to The Verge by multiple former employees that stated Krause resigned in October.

The lawsuit claims former Faraday Future (and Ford) executive Bill Strickland “copied and took potentially thousands” of documents

Faraday Future also argues that during this time, Krause and Kranz “began covertly soliciting a large number of FF employees, including several key executives and technical personnel” to their new company Evelozcity while they were still employed by Faraday Future.

What’s more, Faraday Future claims that the new startup encouraged these employees to steal trade secrets on their way out the door “in order to harm FF and to give Evelozcity an unfair advantage.”

The lawsuit specifically claims that it “appears” that former Faraday Future (and Ford) executive Bill Strickland “copied and took potentially thousands of FF’s most sensitive electronic documents from his FF computer and FF’s servers.”

Strickland is also not named as a defendant in the lawsuit. Here’s more from that section:

Forensic analysis has shown that Mr. Strickland accessed and apparently copied onto a portable USB drive and / or a personal Google drive substantial amounts of FF trade secret information that included at least: plans for parts in vehicles, material specs, cost lists, financial spreadsheets, information about FF’s proprietary VPA system, confidential power train information, vendor information, and many other categories of confidential and proprietary trade secret information. FF is informed and believes that Mr. Strickland took FF’s trade secrets at the encouragement and direction of Evelozcity, and that Evelozcity has wrongfully possessed, disclosed and used FF’s trade secrets. 

The lawsuit makes similar claims about Christoph Kuttner and Sohel Merchant, two other former employees who have gone on to work for Evelozcity. The company states in the lawsuit that “on information and belief,” Kuttner, the former director of interior and exterior trim, “inserted multiple external storage devices into his FF computer and, while they were inserted, accessed (and apparently copied and took) several files and folders containing trade secret and confidential FF information.”

The lawsuit also includes a passage that claims a “preliminary forensic analysis” shows Merchant did similar things, and that he “researched on the internet how he could ‘wipe’ particular files” from his computer around the same time. Neither Kuttner or Merchant are named as defendants in the complaint.

News of Krause’s new company broke late last year as Faraday Future’s financial troubles appeared to be coming to a head. But little is known about the startup’s ambitions. Faraday Future argues in the lawsuit that the broad mission statement on Evelozcity’s website — to “design, develop, and deliver the most competitive, capable, connected and clean mobility device for the next generation” — is evidence that the new company’s purpose “is to compete directly with FF.”

While far more serious, this is not the first action Faraday Future has taken against potential competitors who are filling their ranks with the company’s expats. Two former employees told The Verge last year that Faraday Future sent a cease and desist letter with similar gripes to another electric vehicle startup called Indi EV.

A number of top-level Faraday Future executives have resigned or been fired in the last year, making it hard for the company to hold on to talent as it scoured for funding. When head designer Richard Kim resigned in November — the third of the five original founding executives to leave the company — enough employees stopped showing up that an internal email was sent out reinforcing the company’s work hours. More recently, the company lost its head of HR; she was the second person to leave that post in the last six months.

Funding came at the eleventh hour of 2017, but by then the company’s once nearly 1,500-strong workforce had dipped below 1,000. Main financial backer and former head of Chinese tech conglomerate LeEco, Jia Yueting, is now fully in control as Faraday Future’s CEO.

In a separate internal email sent today that has been obtained by The Verge, Jia announced an “open office initiative” where he pledged to host “a regular lunch meeting with our working teams.”

“These informal lunches are a perfect time to raise questions, discuss ideas, and give us feedback. Please don’t hold back, be yourselves, and be candid,” Jia wrote.

Update January 29th, 8:18PM ET: Added comment from Evelozcity and additional details gleaned from internal Faraday Future emails.

Faraday & Future Inc vs Evelozcity, Inc. by Anonymous ohKLS5K on Scribd