Nikola Founder Faces Fraud Trial Over Promises About Electric Trucks

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Trevor Milton, the Nikola Corp. NKLA 3.24% laminitis who enticed auto-industry leaders and investors with his committedness for a gyration successful electrical trucks, faces a securities-fraud proceedings opening this week connected allegations that helium lied astir his company’s improvement of environmentally affable technology.

Federal prosecutors successful Manhattan past twelvemonth accused Mr. Milton of moving a scheme to enrich himself and boost his stature arsenic an entrepreneur by falsely hyping Nikola’s prospects and duping nonprofessional investors, including stock-market novices. He was indicted connected 2 counts of ligament fraud and 2 counts of securities fraud. Jury enactment begins Monday.

“In bid to thrust capitalist request for Nikola stock, Milton lied astir about each facet of the business,” then-U.S. Attorney Audrey Strauss said erstwhile announcing the charges.

Mr. Milton, who is 40 years old, has pleaded not guilty. He resigned from Nikola successful 2020, respective days aft abbreviated seller Hindenburg Research released a study alleging dozens of misrepresentations that Mr. Milton had made astir the business, including rolling an undrivable motortruck down a elevation to marque it look functional successful a selling video.

Audrey Strauss past twelvemonth successful New York discussed the charges against Trevor Milton.

Photo: Richard Drew/Associated Press

During a pretrial proceeding past week, lawyers for Mr. Milton said they would reason their lawsuit acted successful bully religion and didn’t mean to defraud anyone. Mr. Milton mightiness person utilized definite presumption similar “prototype,” “functional,” and “show car” otherwise than immoderate investors understood them, defence lawyer Marc Mukasey said.

“There is simply a linguistics facet to this,” Mr. Mukasey said.

The apical complaint against Mr. Milton carries a maximum condemnation of 25 years, though nether national sentencing guidelines helium would apt look a overmuch shorter situation word adjacent if convicted connected each charges.

A spokeswoman for Nikola declined to comment. The company, which wasn’t charged, has said it has cooperated with the authorities passim its enquiry and settled a Securities and Exchange Commission probe for $125 cardinal successful December. The institution didn’t admit oregon contradict wrongdoing.

Amid the fallout from Mr. Milton’s ineligible troubles, Nikola continues to pull partners, customers and established executives who are betting connected the company’s program for a web of long-haul trucks powered by hydrogen substance cells. The institution began accumulation of its archetypal motortruck model, powered solely by batteries, successful April.

The hydrogen-powered Nikola Two semi-truck, which Nikola says volition spell connected merchantability successful 2024.

Photo: Nikola Motor/Agence France-Presse/Getty Images

The proceedings marks the adjacent section successful the accelerated emergence and clang of Mr. Milton, who attracted big-name companies like General Motors Co. and Robert Bosch GmbH arsenic imaginable partners successful his imaginativeness for a web of zero-emission long-haul trucks.

Mr. Milton was an unconventional executive. He said helium didn’t decorativeness precocious schoolhouse oregon assemblage but was a serial entrepreneur who started respective companies earlier Nikola. Those ventures often ended up with disputes, litigation and disappointed investors, according to erstwhile employees, customers, investors and documents.

Nikola, which Mr. Milton founded successful 2015 aft selling a bulk involvement successful different of his companies for $12 cardinal successful cash, focused connected hydrogen trucks and the fueling stations to enactment them.

Mr. Milton took Nikola nationalist successful the summertime of 2020 astatine a valuation of $3.3 cardinal erstwhile the institution had yet to merchantability a azygous truck. In the company’s aboriginal days of trading, its marketplace valuation changeable to $30 billion, concisely overtaking auto-industry stalwarts like Ford Motor Co.

Prosecutors allege Mr. Milton’s lies helped to substance Nikola’s rocketing stock price. They accidental helium made mendacious statements astir the company’s quality to nutrient hydrogen, which it planned to usage to powerfulness immoderate vehicles, and its advancement toward manufacturing products similar the Badger, an electrical pickup truck. Nikola scrapped plans for the Badger aft Mr. Milton stepped down and a woody to person GM manufacture the trucks was importantly scaled back.

The proceedings could mostly hinge connected what Mr. Milton said successful tv interviews and podcasts and connected societal media.

On a podcast successful 2020, Mr. Milton said that until Nikola came connected the market, hydrogen was astir $16 a kilogram. “Now Nikola is producing it good beneath $4 a kilogram,” helium said.

Prosecutors said that Nikola had ne'er produced hydrogen, astatine immoderate price.

Mr. Milton besides said successful interviews that the Badger was a “fully functioning conveyance wrong and outside.” When helium was asked connected Twitter erstwhile the archetypal prototype would beryllium produced, helium wrote, “Already.” Prosecutors said Nikola had lone renderings of vehicles and conception sketches.

In 1 tweet, Mr. Milton wrote that the Badger would person a drinking fountain utilizing the h2o created by the truck’s hydrogen substance cell. Days later, Mr. Milton typed “can you portion h2o from a substance cell?” into an net search, prosecutors alleged.

The accelerated ascent successful Nikola’s shares made Mr. Milton a multibillionaire, based connected his holdings. Before stepping down from Nikola, helium purchased a $32.5 cardinal ranch, the astir costly location successful Utah astatine the time, and a Gulfstream jet.

At the clip of the indictment, ineligible observers believed Mr. Milton’s charges indicated a coming question of enforcement actions related to special-purpose acquisition companies, oregon SPACs, which are blank-check companies that rise wealth with a extremity of buying a concern and taking it public.

Such cases mostly haven’t materialized, possibly owed to deterrence oregon due to the fact that SPACs aren’t the inherent drivers of fraud they were erstwhile perceived to be, said Martin Bell, a erstwhile national prosecutor, present a spouse astatine Simpson Thacher & Bartlett LLP.


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In the Milton case, “the DOJ and the SEC went retired of their mode to enactment the SPAC quality presumably successful bid to nonstop a changeable crossed the bow that this was an country they were going to watch,” Mr. Bell said.

SPACs had a surge successful popularity successful 2020 arsenic a means for companies including Nikola, galore with small oregon nary revenue, to spell nationalist extracurricular a accepted IPO. Many companies that went nationalist via SPAC person struggled since.

Mr. Milton received $94 cardinal astir the company’s SPAC woody and has sold much than $300 cardinal successful Nikola banal since his resignation, according to institution filings.

Defense attorneys said the lawsuit mostly hinges connected accepted securities-fraud questions.

“Essentially what this boils down to is: Did Trevor Milton lie, and were those lies captious to investors’ decisions?” said Celeste Koeleveld, a spouse astatine Clifford Chance US LLP. “That’s not constricted to SPACs.”

—Mike Colias contributed to this article.

Write to Corinne Ramey astatine [email protected] and Ben Foldy astatine [email protected]

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