The founder of the much-hyped electric truck manufacturer Nikola Corp. NKLA, -1.33% has been charged with lying to investors about the supposed technological breakthroughs the company had achieved in order to drive up its stock price, federal prosecutors announced Thursday.
Trevor Milton, 39, is accused of claiming that his company had successfully manufactured working prototypes of electric trucks and pickup trucks that would turn the industry on its head, when he had, in fact, never built anything.
“At the bottom, this a very simple case: Milton told lies to generate popular demand for his stock,” said Audrey Strauss,, the U.S. Attorney for the Southern District of New York.
“ At public events, the prototype vehicles were towed into position and were powered by plugs leading from hidden wall sockets, prosecutors said. ”
Milton resigned from Nikola in September as it emerged that the justice department had opened a probe into the startup and its founder over possible false claims. Milton has previously tweeted that he intended to defend himself against “false allegations.”
Prosecutors said Milton was taken into custody Thursday in Manhattan and was later released on a $ 100 million bond. His attorney, Marc Mukasey, said in an email: “Trevor Milton is innocent. He’s been wrongfully accused after a faulty and incomplete investigation. He will be exonerated after trial.”
In a statement, Nikola said that the indictment was against Milton and not the company, and noted that he had not been involved in the business since last year.
“Nikola 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,” the statement read.
In the indictment, federal prosecutors said Milton had for years overinflated the technological developments the company had achieved, claiming it had built working prototypes of its Nikola One truck and Badger pickup truck out of parts the company had fully manufactured on its own.
“ To make it appear the truck prototype was driving, it was towed to the top of a hill and then rolled down to the bottom, prosecutors said. ”
Prosecutors said that, in fact, the prototypes that had been unveiled didn’t function and were Frankenstein monsters cobbled together from parts from other vehicles. At public events, the vehicles were allegedly towed into position and were powered by plugs leading from hidden wall sockets.
In one instance, in which the vehicle was filmed for a promotional film, tape was used to keep the doors of a truck prototype from opening, prosecutors said. To make it appear the truck was driving, it was towed to the top of a hill and then rolled down to the bottom, according to the indictment.
Milton allegedly repeatedly said publicly that the prototypes were fully operational and overstated the number of pre-orders the company had received.
In June 2020, the company went public via a blank-check company, or a SPAC, called VectoIQ Acquisiton. A spokesperson for VectoIQ declined to comment.
Prosecutors said because the company didn’t go public through a traditional IPO, Milton wasn’t bound by the traditional “quiet period” rulings following the listing, and was able to make outlandish public claims on social media about the company’s success in order to drive up the stock price by attracting retail investors.
“Among the retail investors who ultimately invested in Nikola were investors who had no prior experience in the stock market and had begun trading during the COVID-19 pandemic to replace or supplement lost income or to occupy their time while in lockdown,” the indictment read.
Prosecutors said in the initial period following Nikola starting to trade publicly, the value of Milton’s shares shot up by $ 7 billion. After it emerged the company was under investigation, shares tanked causing many retail investors to lose tens and even hundreds of thousands of dollars, prosecutors said. In some cases, some investors lost substantial portions of their retirement savings, they said.
The Securities and Exchange Commission is running a parallel civil complaint. “Having chosen to promote Nikola through social media, Milton was obligated under the securities laws to communicate completely, accurately and truthfully,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement Thursday. “That obligation exists for all public company officials, even those whose companies have only recently entered the public markets through SPAC transactions.”