Trevor Milton, the founder of electric-truck startup Nikola, was indicted Thursday on charges of securities fraud for lying to investors about “core aspects” of the business.
The US Attorney’s Office in Manhattan accused Milton, who resigned as chairman of Nikola in September, with misleading investors, especially amateur investors, about the technology and status of the electric vehicles Nikola, which has never produced an electric truck, hopes to manufacture.
Milton faces two counts of securities fraud and one count of wire fraud, according to the indictment.
The Securities and Exchange Commission also filed civil securities fraud charges against him on Thursday and asked the US District Court of the Southern District of New York to permanently bar him from acting as an officer at any publicly traded company.
A spokesperson for the US Attorney’s Office said Milton surrendered to authorities and is expected to be presented in federal court later today.
Prosecutors alleged that for nearly a year, Milton took to various social media channels to lie about the company’s operations and pump the stock price higher. As the company’s biggest shareholder, Milton stood to gain financially as the stock price rose higher.
“Milton sold a version of Nikola not as it was – an early stage company with a novel idea to commercialize yet-to-be proven products and technology – but rather as a trail-blazing company that had already achieved many groundbreaking and game-changing milestones,” the indictment says.
Some investors who bought shares of the company as Milton painted an unrealistic picture of Nikola lost hundreds of thousands of dollars, prosecutors said.
Investor interest in Nikola began to grow in 2020 when it touted its plans for a pickup truck and tractor trailer cab powered by hydrogen fuel cells.
The company went public in June 2020 through a merger with a special purpose acquisition company, or SPAC. And in September, General Motors announced a $2 billion deal acquisition of a stake in Nikola.
At one point last summer, Nikola’s valuation surpassed Ford, one of the country’s biggest automakers, topping $31 billion before falling again.
Among the lies Milton told investors were claims he made about the Nikola One, a semi-truck prototype, according to the indictment.
Prosecutors said Milton knew the prototype did not work, but repeatedly called it “fully functioning.”
In one episode outlined by prosecutors, Milton attended a commercial shoot for Nikola in which they made the Nikola One truck appear to be functioning when it in fact was simply rolling down a hill.
That allegation was among those outlined in September by New York-based short seller Hindenburg Research. Nikola denied the allegations at the time, but Milton quickly resigned from the company and GM pulled out of their deal with the company.
The indictment confirms many of the allegations made in the short-seller report, and unveiled new details about precisely how misleading Milton was on various occasions, including a 2016 event to unveil the Nikola One.
“A few weeks before the event, Nikola’s chief engineer informed Milton that the truck would not be functioning at the unveiling event unless the event was postponed,” prosecutors said.
“Milton made the decision to proceed as scheduled with the knowledge that the vehicle to be unveiled would not be functioning,” the indictment said.
The indictment went on to detail exactly how non-functioning the truck was at the time. Not only could it not be driven, but the truck needed to be powered externally, such as through a generator or plugged into a wall, prosecutors said.
And the dashboard, which Milton pretended to use to start the truck at the event, was an off-the-shelf tablet, not actually integrated into the vehicle’s systems, the indictment says.
Milton also repeated various other lies about the company’s products and contractual agreements with partners on his own social media with the apparent attempt to boost the company’s stock price and thereby his own fortune, prosecutors alleged.
The indictment said Milton either knew he was overstating and lying about the company’s operations or that he was negligent to make the claims he did.