Pomerantz Achieves $7.5M Settlement in Case Against Faraday Future

Pomerantz LLP recently secured final approval of a $7.5 million settlement in a shareholder action against Los Angeles-based electric vehicle company Faraday Future Intelligent Electric Inc. The suit alleged that Faraday misled investors regarding its electric vehicle reservations and financial outlook prior to going public via a special-purpose acquisition company (SPAC) merger. The settlement recovers approximately 3.4% of the $205 million in estimated total maximum damages, surpassing the 1.8% median recovery for securities class actions settled in 2022. U.S. District Judge Christina A. Snyder granted the settlement preliminary in November 2023.

The lawsuit against Faraday stems from the company's assertions regarding its innovative technologies, production capabilities, and market potential, which generated significant investor interest and financial backing. However, over time, it became clear that Faraday’s promises were not being met. The company experienced numerous production delays, missed financial targets, and repeatedly postponed the launch of its much-anticipated vehicles. It was later revealed that Faraday had allegedly overstated its production capabilities and the operational readiness of its facilities. Reports revealed that the flagship factory was far from being operational, allegedly contradicting the positive outlook presented by company executives.

Investors claim that Faraday engaged in deceptive practices to artificially inflate its stock price. According to the complaint, executives made false statements about production timelines and technological advancements, leading investors to believe that Faraday was poised to revolutionize the electric vehicle market. When the truth came to light, the company's stock value plummeted, resulting in significant financial losses for investors.

The settlement class includes all individuals and entities who purchased or acquired Faraday securities between January 28, 2021, and April 14, 2022, as well as shareholders of Property Solutions Acquisition Corp. who were eligible to vote on the merger.

The plaintiffs were represented by Jeremy A. Lieberman, Jennifer Pafiti, and Austin P. Van, while Faraday was represented by Troutman Pepper Hamilton Sanders LLP.