US charges founder of electric vehicle company Nikola with fraud

Milton (above, in 2019) allegedly said Nikola had built a "full-functioning" semi-truck prototype when he "knew that the prototype was inoperable".
Milton (above, in 2019) allegedly said Nikola had built a "full-functioning" semi-truck prototype when he "knew that the prototype was inoperable".PHOTO: REUTERS

NEW YORK (AFP) - US officials on Thursday (July 29) charged Nikola founder and former executive chairman Trevor Milton with "brazenly" defrauding investors through a litany of false claims about the company's electric vehicles.

"In order to drive investor demand for Nikola's stock, Milton lied about nearly every aspect of the business," said US Attorney for the Southern District of New York Audrey Strauss at a news conference held after her office released a 49-page indictment of Milton on three counts of fraud.

"Milton brazenly and repeatedly made false and misleading claims about the status of Nikola technology," she said.

Milton, who resigned from Nikola in September of last year, allegedly claimed that the company had built a "full-functioning" semi-truck prototype when Milton "knew that the prototype was inoperable," according to the indictment.

He made these and other false claims to "induce retail investors to purchase Nikola's stock," the indictment said.

When Milton's statements were shown to be false, shareholders, including some with little prior investing experience, "suffered tens and even hundreds of thousands of dollars in losses, including, in certain cases, the loss of their retirement savings or funds that they had borrowed to invest in Nikola," said the indictment.

Milton was taken into custody early on Thursday and is expected to appear later in court Thursday, Strauss said.

Strauss said false claims occurred between November 2019, when Milton took steps to take Nikola public, and September 2020, when he left the company.

During this period, Milton became "increasingly preoccupied" with keeping Nikola's stock price high, enabling his own holdings to top US$7 billion (S$9.4 billion) when Nikola shares were at their peak, she said.

Brief stardom

Milton vaulted to prominence last September when the company announced a partnership with General Motors shortly after going public through a merger with a special-purpose acquisition company (SPAC).

But things quickly fell apart. Two days after the GM deal was announced, Hindenburg Research published a report accusing the startup of "intricate fraud" based on multiple lies by Milton.

Milton left the company later that month and GM terminated the transaction to take a stake in Nikola in late November.

Nikola said that Milton has not been involved with the company since his resignation.

"Today's government actions are against Mr Milton individually, and not against the company," Nikola said in a statement.

"The company has cooperated with the government throughout the course of its inquiry. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery electric trucks later this year from the company's manufacturing facilities."

In parallel to the criminal case, the Securities and Exchange Commission (SEC) unveiled civil fraud charges against Milton, alleging he repeatedly spread false information about Nikola products on social media.

The SEC is seeking to bar Milton from serving as a corporate officer and director, as well fines and payments for ill-gotten gains, according to a press release.

Shares of Nikola slumped 9.1 per cent to US$12.89 in midday trading.