Faraday Future, the Chinese electric vehicle company's founder and former Chief Executive Jia Yueting has filed for bankruptcy in the U.S.
In a statement on the company's Website, Faraday Future said its founder filed for bankruptcy and restructuring under Chapter 11 in the U.S. to address his personal debts in China. The Chinese tycoon reportedly owes more than 100 creditors as much as $3.6 billion.
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Creditor trust will be created as part of filing
As part of the filing, a creditor trust was created for his creditors. The creditors' trust will be jointly managed by a committee of creditors and the trustee. All of his existing interest in Smart King, the holding company for Faraday Future, will be transferred to the creditor trust to better protect creditors as well as pay back his debt. The bankruptcy filing won't impact the company or its normal operations.
"This Plan provides YT an opportunity to address his personal debts, help facilitate FF’s equity financing efforts and prepare for an IPO, and further advance the implementation of FF’s US-China dual home market strategy," wrote the company in the statement.
Faraday Future founder to still have a role in the company
The company said Jia will be involved in Faraday Future and that the filing will not impact the ownership of employee stock options or shares acquired by the company when employees exercised stock options. The company plans to continue to use stock options to recruit and retain talent. In order for the plan to proceed Jia needs 90% of creditors to back the plan by 8 November. As part of the deal, Jia and his wife get released from all personal liability and existing claims have to be dropped. If they don't approve, he has a Chapter 11 bankruptcy plan as the backup.
The announcement marks a major development in the story of Jia who was known for taking on a huge amount of debt. According to media reports, he was added to China's debtor backlist in 2017, which prompted him to set up residency in the U.S. Jia stepped down as CEO of Faraday Future last month. Carsten Breitfeld of BMW became CEO. The company is working on an electric SUV to be rolled out at the end of next year.