Nikola founder Trevor Milton stands trial on fraud charges

CEO and founder of U.S. Nikola, Trevor Milton speaks throughout presentation of its new full-electric and hydrogen fuel-cell battery vans in partnership with CNH Industrial, at an occasion in Turin, Italy December 2, 2019.

Massimo Pinca | Reuters

The founder of electrical semitruck maker Nikola Motor is standing trial on fraud charges associated to statements he made concerning the firm’s know-how and merchandise, statements that federal prosecutors allege have been exaggerated and deceptive.

The U.S. Attorney’s Office in Manhattan has alleged that Trevor Milton, who based Nikola in 2014, lied about “nearly all aspects of the business” throughout his time as chairman and CEO of the corporate. Those lies have been supposed to bolster gross sales of the startup’s inventory, prosecutors alleged in indictments launched in 2021 and earlier this 12 months. Milton has denied the charges.

“He lied to dupe innocent investors into buying his company’s stock,” Assistant U.S. Attorney Nicolas Roos mentioned in opening statements in U.S. District Court in New York Tuesday. “On the backs of those innocent investors taken in by his lies, he became a billionaire virtually overnight.”

The trial started with jury choice on Monday and received underway on Tuesday. Prosecutors advised potential jurors that the proceedings have been more likely to final about 5 weeks.

The trial caps a surprising rise and fall of Nikola underneath Milton.

The firm’s inventory worth briefly surged to greater than $90 per share in June 2020, days after it went public by way of a merger with a special-purpose acquisition firm (SPAC). The inventory run-up made Nikola – an organization that did not but have income on the time – extra priceless than Ford Motor.

But its shares fell sharply after Milton was pressured out of the corporate in September of that 12 months, following fraud allegations made by short-seller Hindenburg Research. Both the Securities and Exchange Commission and the U.S. Department of Justice opened investigations following Milton’s departure; he was indicted on three counts of fraud by a grand jury in July 2021. Prosecutors added a fourth rely in June.

Nikola’s shares closed at $5.03 apiece on Tuesday.

Milton is going through two counts of securities fraud and two counts of wire fraud, all associated to statements he made about Nikola’s enterprise whereas he was chairman and CEO of the corporate. If convicted, he might resist 25 years in federal jail.

Milton’s lawyer, Marc Mukasey, mentioned Tuesday that Milton sought to convey a imaginative and prescient for the way forward for trucking, to not mislead traders. Mukasey has indicated that the protection plans to argue different executives at Nikola, together with the corporate’s basic counsel, signed off on Milton’s statements.

Nikola itself is not going through charges on this case. The SEC introduced associated civil charges towards the corporate final 12 months, however that case was settled in December after Nikola agreed to pay a $125 million advantageous. Milton nonetheless owns Nikola inventory, however the firm has in any other case reduce ties with its founder.

Here’s what Milton is charged with:

Prosecutors allege that Milton made “false and misleading statements regarding Nikola’s product and technology development” as a part of a “scheme” supposed to induce retail traders to purchase shares of Nikola. Prosecutors allege:

  • Milton mentioned that the corporate’s first semitruck prototype, referred to as the Nikola One, was “fully functional” – but it surely wasn’t.
  • A video exhibiting the prototype truck apparently driving underneath its personal energy was created by rolling the truck — which could not drive on its personal — down a hill.
  • Separately, Milton claimed that Nikola had engineered and constructed an electrical pickup truck referred to as the Badger, fully on its personal, after years of labor. But, prosecutors say, the Badger was little greater than “concept sketches and renderings” on the time of Milton’s preliminary statements.
  • While the corporate ultimately confirmed a prototype Badger, the present truck was in truth constructed by third-party distributors and based mostly on a truck from a big automaker.
  • Milton additionally advised traders that Nikola was producing hydrogen fuel — wanted to refuel its fuel-cell-powered vans — at a lowered price; that Nikola had developed electric-vehicle batteries in-house; and that Nikola had binding orders representing “billions in revenue” for its electrical vans. All of these statements have been false, in accordance with prosecutors.

Milton can be accused of creating comparable misrepresentations to the vendor of a ranch he bought in 2020, in an try and get the vendor to simply accept Nikola inventory as half cost for the acquisition.

Prosecutors are anticipated to start presenting their full case towards Milton to jurors on Wednesday.

—Reuters contributed to this report.

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