Time runs out for embattled Chinese tycoon Jia Yueting as court freezes his Faraday Future assets

  • A British Virgin Islands court rules in favour of To-Win Capital, allowing it to proceed with freezing Jia Yueting’s 33pc stake in Faraday Future
PUBLISHED : Tuesday, 11 December, 2018, 1:32pm
UPDATED : Tuesday, 11 December, 2018, 11:07pm

China’s heavily indebted businessman Jia Yueting is set to lose control of the electric car start-up Faraday Future, after a court in the British Virgin Islands ordered freezing his shareholding in the wannabe Tesla killer.

The Eastern Caribbean Supreme Court in the BVI last week ruled in favour of Jia’s creditor, To-Win Capital, and allowed it to proceed with freezing his 33 per cent stake in Faraday Future controlled through his nominees and various layers of offshore holding companies.

The ruling vindicates an arbitration award given by the Beijing Arbitration Commission in favour of To-Win Capital against Jia in January.

“This is significant because it is the first known success by Jia Yueting’s creditors to freeze and enforce rulings against his assets outside China, particularly in the offshore jurisdictions,” said Shaun Wu, a partner at the law firm Kobre & Kim in Shanghai, which represents To-Win Capital.

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“We know that many creditors are queuing at Jia’s gates to get their money back, but the domestic assets under Jia are mostly already frozen, and so we are setting out to seize his most important offshore assets, namely his shareholdings in Faraday Future held through BVI structures,” he added.

Jason Kang, another lead lawyer at Kobre & Kim based in Hong Kong, said that the ruling now means that Jia cannot freely deal with his 33 per cent stake in the company or transfer it to someone else.

Emails and phone calls sent to Jia and his representatives at Faraday Future on Tuesday were not answered.

Kang said that to enforce a judgment or award given in the BVI, the first step that a creditor has to take is make an application to the court to obtain ownership of the stake.

Jia is one of China’s most high-profile entrepreneurs who once openly challenged Apple and Tesla for being outdated. The founder of the internet conglomerate LeEco Group ran into trouble as his business crumbled under the weight of heavy debt last year.

Leshi, the Shenzhen-listed arm of LeEco Group, is also owed billions of yuan by companies related to the LeEco Group.

Cash-strapped electric car maker Faraday Future to cut pay, lay off staff in dispute with China Evergrande unit

Jia went into self-exile in the US after missing a deadline set by the Beijing Securities Regulatory Bureau, which ordered him to return to China before the end of 2017.

In an open letter published last year, Jia had asked his wife and younger brother to represent him and handle regulatory issues relating to the billions owed in China. However, he insisted that he would “do everything he could to solve any debt problems with both the listed and unlisted companies”, from the US.

He stressed that the only hope to turn things around was “to guarantee volume production and to ensure the delivery of the FF91,” referring to the luxury electric car that LeEco was developing with Faraday Future in California.

However, as Faraday Future’s financial condition deteriorated it closed down a plant and laid off people.

Evergrande pays US$853.85 million for stake in troubled electric vehicle maker Faraday Future

But in a dramatic turn of events in June, Evergrande Health Industry Group, a subsidiary of China’s second largest developer China Evergrande, announced that it would acquire a 45 per cent stake in Faraday Future for US$2 billion through a network of offshore holding companies.

But that relationship turned sour in October as Evergrande Health and Faraday Future were embroiled in a lawsuit regarding the investment.

This has triggered lay-offs, furloughs and people leaving since October, as the financial situation has worsened, Faraday Future said a statement issued this month.