Nikola founder guilty of fraud
A federal jury has found Nikola founder and former CEO Trevor Milton guilty of fraud charges related to false claims about the company’s technology.
Milton was found guilty on one count of securities fraud and two counts of wire fraud. Sentencing is set for Jan. 27.
In July 2021, the U.S. Attorney’s Office for the Southern District of New York unsealed the criminal indictment charging Nikola founder Trevor Milton with securities and wire fraud. The indictment accuses Milton of defrauding and misleading investors about developments of products and technology by Nikola.
According to the indictment, Milton made false and misleading statements to nonprofessional investors through social media and television, print and podcast interviews. It alleges that Milton made those statements in an attempt to induce those investors to buy Nikola stock. Alleged false claims include Nikola had done the following:
- Had early success in creating a “fully functioning” semi-truck prototype known as the Nikola One, when Milton knew the prototype was inoperable.
- Engineered and built an electric- and hydrogen-powered pickup truck known as the Badger from the “ground up” using Nikola’s parts and technology, when Milton knew that was not true.
- Produced hydrogen and was doing so at a reduced cost, when Milton knew that in fact no hydrogen was being produced at all by Nikola, at any cost.
- Developed batteries and other important components in-house, when Milton knew that Nikola was acquiring those parts from third parties.
- Reservations made for the future delivery of Nikola’s semitrucks were binding orders representing billions in revenue, when the vast majority of those orders could be canceled at any time or were for a truck Nikola had no intent to produce in the near term.
During a filmed and broadcasted unveiling event in December 2016 for Nikola One, Milton claimed the truck “fully functions and works, which is really incredible.”
“When our company first announced the Nikola One semitruck in 2016, most other brands said zero emission would never work,” Milton said in a March 30, 2020, merger announcement. “Wow, were they wrong.”
However, the truck showing during the 2016 event was never tested, validated or completed. In fact, the truck was missing important parts, including gears and motors, and the control system was incomplete.
“The infotainment system in the cab was also incomplete,” the indictment claims. “Instead, for the purpose of the unveiling event, tablet computers or other computer screens were mounted into the areas where the screens for the infotainment would be, and the screens were set to display images created to have the appearance of infotainment screens, with speedometers, maps, and other information displayed. Further, the truck was towed onto the stage at night prior to the event, and the screens and lights were powered by an external battery and a power cord running under the truck to the wall, which had to be manually disconnected as the stage spun.”
Additionally, the truck was connected to an airline to keep its air suspension and air brakes operating due to a leak in the air supply. Nikola staff operated the headlights with a remote control during the event.
According to a news release, the securities fraud counts carry maximum penalties of 20 and 25 years in prison, respectively. The wire fraud count carries a maximum penalty of 20 years in prison.
According to Forbes, Milton’s wealth plummeted from a June 2020 high of $8.7 billion to $1.1 billion within a day, including a 15% downward spiral of Nikola stock prices.
Milton’s fortune took a bigger hit in September 2020 after investment research firm Hindenburg Research released a scathing report highlighting most of the damaging information contained in the indictment released on Thursday. Within two weeks, Nikola stock took a 35% nosedive. Subsequently, Milton removed himself as Nikola’s CEO while denying Hindenburg’s allegations.
In an interview with Land Line, current Nikola CEO Mark Russell said that the battery-electric Nikola Tre will be introduced to the North American market at the end of 2021 for launch customers, with the fuel cell version of the Two and Tre available in 2023. The Nikola Two is a daycab version of the Nikola One. No specific claims were made about the Nikola One. LL