Entrepreneurship

Nikola founder Trevor Milton indicted for allegedly lying about “nearly all aspects of the business”

Read more at www.cnn.com

The indictment alleges that from November 2019 through September 2020, Milton made false and misleading statements about “nearly all aspects of the business” of developing electric and hydrogen-powered trucks.

Milton was taken into custody in New York early Thursday, said Audrey Strauss, US attorney for the Southern District of NY, at a Thursday press conference.

“Today’s criminal charges against Milton are where the rubber meets the road. Now Milton will have to answer in a court of law for his allegedly false and misleading statements,” said Strauss. “This is a very straight forward case. Milton told lies to generate popular demand for Nikola stock. Milton’s lies were instrumental in driving retail investors to eagerly buy up Nikola’s stock.”

In addition to criminal charges the Securities and Exchange Commission Thursday filed a civil complaint against Milton. But Nikola itself does not face either criminal or civil charges

Milton’s legal team issued a statement saying he is innocent of the charges.

“This is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified,” said the statement. “Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry. 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. 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. “

SPAC rules also under attack

Strauss said that Milton took advantage of looser rules around using a SPAC to take the company public rather than a traditional IPO. In an IPO executives can not make statements about the company that are not disclosed in SEC filings.

“Milton wanted to be in control and didn’t want bankers telling people what his company was like,” said Strauss. “Milton exploited this feature of the SPAC for his own benefit.” She said at its height Milton’s stake in Nikola was worth $7 billion, even though it had yet to bring in any revenue.

Specifically, prosecutors allege that Milton claimed Nikola had a “fully functioning” semi-truck prototype known as the “Nikola One,” when he knew that the prototype was inoperable. Strauss said the closest it ever came to operating was when it was pushed to the top of a hill then rolled down to produce a video showing it in motion.

The indictment also says Milton also claimed that the company was producing hydrogen and was doing so at a reduced cost, when he knew that in fact no hydrogen was being produced at all by Nikola, at any cost. Milton was serving as executive chairman of the company at that time.

The allegations of deception were first made by short-seller Hindenburg Research, which issued a report in September of 2020 which caused shares of Nikola to plunge. Milton resigned from his post in later that month, and a company investigation released in February of this year also accused Milton of misleading investors.

But the federal grand jury charge obtained by the US Attorney for the Southern District of New York is by far the most serious allegation against him, and seeks to have him forfeit all the money he made at Nikola. He still owns about 20% of the company’s outstanding shares, worth about $1 billion as of Wednesday’s closing price.

“We commend regulators for acting expediently to protect investors and hold Milton accountable for his egregious lies,” said a statement from Hindenburg. “We also want to congratulate the brave whistleblowers who came forward when they saw something wrong, despite immense pressure to stay silent. This day would not have happened without their contributions.”

Nikola issued a statement pointing out that Milton is no longer involved with the company’s operations.

“Today’s government actions are against Mr. Milton individually, and not against the company,” it said. “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.”

Shares of Nikola, which have never recovered from the slide after Hindenburg’s report, were down as much as 11% in trading Thursday on the news. Shares are down more than 75% from the record high they reached before the Hindenburg report.

Read more at www.cnn.com

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