Nikola Motor founder Trevor Milton – the billionaire who once promised to build fuel-cell-electric trucks — now faces three counts of fraud for misleading investors about the company’s technologies and sales prospects.
The U.S. Attorney’s Office for the Southern District of New York alleges that he spread the falsehoods about “nearly all aspects of the business” through social media and other platforms, causing particular harm to retail investors.
Milton falsely claimed a prototype Nikola One truck could be driven, U.S. attorney for the southern district of New York Audrey Strauss said at a press conference.
“The closest it ever came to driving was when a group of Nikola engineers took it to the top of a hill and rolled it down so it could be filmed for a commercial,” she said, noting that it lacked motors and control systems. Even the infotainment system was limited to tablets with prototype mockups, she added.
And while Milton said the company was developing the technology for a Badger pickup truck, it was nothing more than a purchased Ford F-150 pickup with Nikola branding, Strauss said. She also referred to other alleged falsehoods in which Milton claimed Nikola was developing technology and parts when they were actually sourced through outside suppliers, and how he said the company was producing hydrogen fuel when this was not the case.
A promise of “billions of dollars” in orders for Nikola trucks was also identified as reservations that could be canceled at any time.
“Today’s charges against Milton are where the rubber meets the road,” Strauss said. “Now Milton will have to answer in a court of law for his false and misleading statements.”
Milton was taken into custody on Thursday morning.
“Trevor Milton is innocent. This is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified,” said a spokesperson for Milton’s legal team including lead counsel Brad Bondi and co-trial counsel Marc Mukasey and Terence Healy.
They referred to Milton as an entrepreneur with a long-term vision of helping the environment.
“From the beginning, this has been an investigation in search of a crime. Justice was not served by the government’s action today, but it will be when Mr. Milton is exonerated.”
Trevor Milton’s claims
Prosecutors say Milton exploited Nikola’s structure as a special purpose acquisition company to make statements that would not otherwise be allowed by executives involved in a traditional initial public offering (IPO). He openly boasted how this gave him the opportunity to speak directly to the market.
Milton resigned as Nikola’s chairman in September 2020, just weeks after a report authored by Hindenburg. Nikola: How to parlay an ocean of lies into a partnership with the largest auto OEM in America accused the company founder of false statements to secure a deal with General Motors.
General Motors had announced plans to take an 11% ownership stake in Nikola, and signed a strategic partnership to engineer and build the Nikola Badger pickup truck. Through a related memorandum of understanding unveiled in November, GM and Nikola announced that GM Hydrotec fuel cell systems would be used in Nikola Class 7 and 8 trucks, even though Nikola had previously said it was developing required fuel systems in house.
Plans for GM’s equity stake in Nikola were dropped, and Nikola announced it would refund all deposits for the Badger, which depended on an OEM partnership.
It wasn’t the only deal that collapsed.
A partnership to build battery-electric waste truck with Republic Services came to an end earlier in the year, with both companies announcing that the new technologies and design concepts would take longer to develop than expected and result in “unexpected costs”. A vehicle order for 2,500 units was canceled.
Ryder System and Nikola also terminated a deal that would have seen Ryder offer exclusive support for Nikola’s hydrogen-electric semis.
Nikola continues with Nikola Tre
In the months since Milton’s departure, Nikola executives have said they remain on pace to meet certain milestones, including trial production of the Nikola Tre battery-electric truck in Ulm, Germany and Coolidge, Ariz. The company has also announced plans to break ground on a hydrogen fueling station.
The OEM has reportedly built five battery-electric Tre cabover prototypes, with two undergoing testing at proving grounds in the northern U.S., two on a test track in Arizona, and one in Germany.
Milton’s personal Nikola stock was once valued at high as US $8.5 billion, when the company’s value surpassed $31 billion and even bettered the value of Ford Motor Co. When he resigned in September 2020, the value of that Nikola stock plunged.
“The company lost approximately 40% of its value and individual investors were cheated out of hundreds of thousands of dollars,” says Philip Bartlett, inspector in charge of the New York division of the U.S. Postal Inspection Service.
He cautioned investors to verify claims, and be wary of “once-in-a-lifetime” investment officers.
“If it doesn’t feel right, it’s probably a scam,” he said.
This case demonstrates that corporate officers can’t say whatever they want, said SEC enforcement director Gurbir Grewal, adding that Milton reaped tens of millions of dollars in personal benefits through his claims.
When a reporter asked whether Tesla founder Elon Musk would also be held accountable for claims proven to be false, Grewal said, “We will hold them accountable for material false statements that they make.”
Tesla unveiled a prototype of its battery-electric Tesla Semi in 2017, and originally promised to begin production in 2019. Production plans have most recently been pushed out to 2022.
- This is a developing story and will be updated as more information becomes available.