What the Epstein Files reveal about electric car startups and Silicon Valley

After the Department of Justice released a trove of new documents linked to notorious sex offender Jeffrey Epstein, journalists have been digging through them. I found extensive connections with Silicon Valley.

TechCrunch’s Sean O’Kane checked out how to do it A mysterious businessman named David Stern built a relationship with Epstein He offered to invest in several electric vehicle startups, including Faraday Future, Lucid Motors, and Kano.

In the last episode of Stock podcastKirsten Korosek and I spoke with Sean about what he learned, and discussed whether Epstein’s revelations would lead to broader repercussions in Silicon Valley.

You can read a preview of our conversation, which has been edited for length and clarity, in the transcript below.

Shawn: There are always people on the edges who don’t necessarily want to be at the forefront of the investment scene. And that’s why I started looking into these files, partly because a long time ago, flashbacks to 10 years ago in particular, there was a lot of Chinese investment in space.

This was even before the rush of electric car startups in China that we see today (…) In self-driving cars, but electric cars in particular, there was this moment where all Chinese investors, Chinese companies, and state-owned automakers wanted to do was be seen as Silicon Valley startups. So they came here and invested in companies and helped launch them, or in some cases even set up offices in Silicon Valley.

And in that environment emerged a lot of the companies that I’ve covered for a long time. There has never been a complete picture of how many of them are funded.

One in particular, this company called Canoo, which is now bankrupt and out of business, had perhaps the most obscure group of investors ever. They weren’t really open about this when they first came out of hiding in early 2018. It honestly took until investors uncovered a lawsuit between some of the people who ran the company near the top.

At that time, it was this businessman in China who was relatively close, a former son-in-law and the fourth-highest ranking official of the Chinese Communist Party under the former leader of China and a giant electronics tycoon from Taiwan. Then there was a really weird guy named David Stern, who was the third founding investor. There was very little information about this man.

I could tell, at the time, that he was a German businessman, and that he had some ties to China, but it wasn’t really clear how he got involved. The only thing I really remember hearing at the time was that he was close to Prince Andrew, which I thought was very strange, this idea that someone told me a long time ago, maybe in 2018 or 2019, that Prince Andrew was involved in this company Canoo in some way, maybe not an investor, but advising or something like that.

That was something that stuck with me for a very long time, because I went looking for that information as more of these files came to light, assuming that being close to Prince Andrew meant being close to someone like Epstein.

And that was the case here, more than I could have ever imagined, because this Stern guy went from an enigma or a ghost to someone who was present during all of these deals 10 years ago, where we see him promoting, in about a year and a half, investments in Faraday Future, trying to convince Epstein to maybe throw a few hundred million dollars into that company, trying to buy out the 30% stake that the founder of Faraday Future had bought or acquired when Lucid Motors came into the company. Time, which I feel is an overlooked dynamic (in) how those companies grew at that time — and then also in Kano.

Epstein never invested in any of those companies despite being close to the company, but it was just something revealing. And I get into it The story I wrote last weekBut we got this decade-long relationship between Stern and Epstein when he first approached him in 2008, hat in hand, introduced himself and said, “Hey, I want to invest in China. Will you put in some money?” For being someone he seemed so close to after all.

Kirsten: It’s all really interesting, and goes back to my initial comments about that sometimes when you have the opportunity to look at new information about how trades appear, it actually changes your perception and perspective of time.

And for those who haven’t followed Mobility, think of it as the way we think about physical AI these days. Everyone was talking about it. Every automaker wanted a piece of the quote “future of transportation” or “mobility.” And so it makes perfect sense that some of these more secretive species were jumping around as well.

Sean, one of the points you made to me while I was working with you on the story, in terms of editing it, you were (saying), it was very clear that Epstein and David Stern weren’t really interested in investing and building companies. It was all about how to make the most money in the fastest time. And I think that’s important and interesting historically and gives you insight into – in addition to all the horrible, horrific, horrible things he did to human beings, he (Epstein) was a complete worker as well, in order to make money as quickly as possible. And you see that in these emails and exchanges between David Stern and Epstein.

Shawn: Yeah, really for those two points, I open the story with a moment in time where Lucid Motors (…) was basically a battery supplier for a long time and then turned into the passenger vehicle startup that we know today, but they were really struggling to get the D-series up at the time, and they really needed that money to start producing their first electric sedan.

They were struggling, largely behind the scenes because the founder of Arrival had quietly amassed this large stake and was kind of pushing people away and making it seem like an uninvestable company in some ways, but the hype around all of that at the time was creating opportunities for people like Stern and Epstein, and we see them talking in these emails, you know, Stern coming to Epstein and saying, “I heard they’re raising their money. Can you get information from Morgan Stanley?”

Epstein turns around and passes that information back on, and then you see this discussion about, well, well, Morgan Stanley says that Ford – which was reported at the time – had some sort of investment offer, potential takeover offer, on the table for Lucid Motors (and) that was going to go into that Series D. And it cuts to – do we invest in this and maybe get a big return in the future? Or is it something we sell when Ford comes in a few months later, if we can get that share now at lower selling prices?

In the end, they didn’t make it, but Stern eventually invested in Canoo and helped launch that company.

Anthony: One thing — maybe stepping back a little bit on specific industries or investments — that’s also an important part of the context that generally gets mentioned in any of these stories about Epstein in Silicon Valley, but is worth repeating here, is that he (pleaded) guilty to soliciting prostitution from a minor in 2008.

Almost all of the emails we talk about with these stories (and) in almost every other story about Epstein in Silicon Valley come after that. It’s also partly a story about how comfortable people are with the idea that this guy actually has a mysterious past. He was not the notorious criminal he eventually became, but there were things that were already known about him, and because he was a source of authority connections, famous names, and money, many people were willing to look beyond him.