NEW YORK (NYTIMES) - In a warning shot to a thriving corner of Wall Street, federal authorities on Thursday filed criminal and civil securities fraud charges against the founder of Nikola - a start-up automaker that went public by merging with an investment firm last year.

An indictment by the US attorney's office in Manhattan charged the founder, Trevor Milton, with misleading investors - in particular individual investors - about the technology for battery and hydrogen powered vehicles it had hoped to manufacture. In a separate civil case filed on Thursday, the Securities and Exchange Commission also accused Milton of securities fraud.

The twin legal filings are the biggest lightning bolts prosecutors and securities regulators have delivered to the supercharged market for the investment vehicles known as special-purpose acquisition companies (Spacs), which regulators and some investors have argued are rife with potential problems. More such cases could be filed in the coming months; regulators are investigating several other companies and executives in similar circumstances.

Spacs have raised nearly US$200 billion (S$270.5 billion) in initial public offerings for the express purpose of finding and buying an operating business. If Spacs do not buy a company within two years, their sponsors, often professional investors or Wall Street bankers, have to return the cash they raised - a provision that critics argue encourages them to buy shaky or unproven businesses.

The boom in Spacs has coincided with and been spurred on by retail investors who share trading tips and strategies on social media, often deciding en masse to buy the shares of companies they believe are undervalued or are destined for greatness. These individual traders, often with the encouragement of professional investors or corporate executives, have helped drive up the stock prices of various companies, including GameStop, AMC Entertainment and Tesla.

Prosecutors and the SEC said that for nearly a year, Milton used social media, television and podcasts to spread "false and misleading statements regarding Nikola's product and technology."

One such misleading statement, the charging document filed by prosecutors said, concerned the company's Nikola One long-distance truck prototype. The prototype did not work, contrary to the glowing statements that Milton made about it.

Federal prosecutors and securities regulators started investigating Nikola last fall around the time an investment firm published a report questioning its products and some of Milton's claims. That firm, Hindenburg Research, said the company had put out a promotional video to suggest it had a working prototype - but never disclosed the truck was moving forward only because it was rolling down a hill in neutral gear. Milton resigned a few weeks later.

The SEC also noted in its complaint that a Bloomberg News article, published in June 2020, said Milton had "exaggerated" the truck's abilities.

Yet Nikola went public in June 2020 in a US$700 million merger with a Spac called VectorIQ, which was founded by Steve Girsky, a former General Motors executive and board member who has also worked at Morgan Stanley. Mr Girsky put Milton and Nikola in touch with GM's chief executive, Mary Barra, and the two companies agreed to work together on heavy-duty and pickup trucks. That deal was greatly scaled back in November.

Some young, untested businesses have opted to merge with Spacs because doing so is usually faster, requires fewer disclosures and attracts less scrutiny from investors and regulators than a conventional initial public offering. Nikola, for example, managed to go public just five years after Milton founded it.

"In carrying out his fraudulent scheme, Milton exploited features of the Spac structure," Audrey Strauss, the U.S. attorney in Manhattan, said Thursday.

Federal prosecutors contend that retail investors were hurt by the stock's sharp drop, which started last summer, but not early investors in the company, including Milton. Nikola's shares fell about 15 per cent Thursday, to around US$12, compared with more than US$65 in the middle of last year, a point at which the company had a valuation in excess of Ford Motor Co.'s.

The SEC's complaint said Milton held approximately 25 per cent of Nikola's stock after the Spac deal and "ultimately reaped tens of millions of dollars in personal benefits as a result of his misconduct." Securities regulators noted that Milton "embarked on a relentless public relations blitz aimed at a class of investors he called 'Robinhood investors'" - a reference to the popular retail brokerage firm, which just raised US$2.1 billion in its own IPO.

Milton's legal team said in a statement that the government was seeking to "criminalize lawful business conduct." The team added, "Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses."

Milton was taken into custody in New York City on Thursday morning and was released on a US$100 million bond co-signed by two other people and secured by two properties worth US$40 million.

Nikola said in a statement that Milton had not been involved with the company since resigning in September.

"Today's government actions are against Mr Milton individually, and not against the company," the company said. "Nikola has cooperated with the government throughout the course of its inquiry."

Authorities did not charge other individuals, including other executives, or the company itself with wrongdoing. The SEC's complaint appeared to justify its sole focus on Milton by noting that even after he had become executive chairman of Nikola after the merger with VectorIQ, he had firm control over the company and remained its primary spokesman and gave orders to others. The complaint called him a hands-on executive who "engrossed himself in the details of Nikola's technology and product development process."