The Department of Justice has opened an investigation into struggling electric vehicle startup Workhorse, according to The Wall Street Journal. The probe is reportedly being led by the US Attorney’s office for the Southern District of New York, which often investigates financial crimes.
Workhorse is already part of an investigation from the Securities and Exchange Commission that first came to light in September, when short-selling research firm Fuzzy Panda released a report accusing the EV startup of fraud. It’s the third EV startup under investigation from both agencies, following Nikola (whose founder was indicted on fraud charges earlier this year) and Lordstown Motors (which Workhorse has deep ties, too). Both of those startups came under investigation after Hindenburg Research, another short-selling research firm, published reports filled with accusations of fraud.
The startup, an Ohio-based maker of commercial electric delivery vehicles, has struggled mightily the last few years as it fought for — but ultimately lost — the contract to build the next-generation mail truck for the United States Postal Service. That contract instead went to Oshkosh Defense. Workhorse protested the decision in the US Court of Federal Claims earlier this year, but abruptly dropped the lawsuit in September.
Workhorse has also had trouble with its flagship vehicle, the C-1000. After finally getting it into production in August, the company immediately said it needed to redesign the van. In September, it stopped shipping them altogether and recalled all 41 that had been delivered. The startup’s executive ranks have turned over recently as well, with CEO Duane Hughes departing in July and CFO Steve Schrader leaving in October.
The Fuzzy Panda report published in September contained allegations that Workhorse lied about the validity of some of the orders it had collected for its delivery vehicle, and that the startup may have also committed accounting fraud.
Throughout all this turmoil, Workhorse has largely survived on loans from hedge funds. It has put up much of its intellectual property as collateral for those loans and stands to lose a lot in the event of a default.
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