Nikola founder sentenced to four years in prison for fraud

Nikola founder Trevor Milton was sentenced to four years in prison more than a year after he was found guilty of fraud.

On Monday, Dec. 18, Judge Edgardo Ramos of the U.S. District Court in the Southern District of New York sentenced Milton to four years in prison and ordered him to pay a $1 million fine. The sentence puts an end to a saga that nearly ended zero-emission truck manufacturer Nikola.

Milton asked the court to sentence him to probation. The U.S. government sought an 11-year prison sentence.

Milton was indicted on criminal charges of wire and securities fraud in July 2021. The indictment accused him 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. His alleged false claims include that 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.
• Received reservations that were binding orders representing billions in revenue for the future delivery of Nikola’s semi-trucks, 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.

In September 2020, investment research firm Hindenburg Research released a scathing report highlighting most of the damaging information contained in the indictment. Within two weeks, Nikola stock took a 35% nosedive. Subsequently, Milton removed himself as Nikola’s CEO while denying Hindenburg’s allegations.

Even after a jury found Milton guilty of fraud last October, the Nikola founder has maintained his innocence.

In a 50-page sentencing memorandum filed in November, Milton portrays himself as a visionary with a modest background and as naive when it comes to the corporate world.

“Despite his creative talents, Trevor was untrained as a corporate executive and a novice when it came to public markets and finance,” the memorandum states. “He needed help ‘understanding what it means to be an executive of a public company’ and how the NASDAQ market worked. He knew nothing of securities laws or regulation, but he had the self-awareness to recognize as much, and he asked Nikola to provide him with ‘a good SEC attorney,’ an unlikely request from someone who intended to mislead investors.”

On the other hand, the U.S. government depicts Milton as a fraudster with “a long history of dishonesty” that predates Nikola. In one example, federal prosecutors point out that Milton claimed he dropped out of college due to his entrepreneurial character. However, in reality, he was expelled from college after it was discovered he’d hired others to complete his work.

In addition to the criminal indictment, the Securities Exchange Commission filed a civil complaint against Nikola. The company settled that case for $125 million in November 2021. LL