Nikola founder convicted in fraud trial
17 October 2022
After nearly five hours of deliberation, a jury in New York federal court found Nikola founder Trevor Milton guilty of one count of securities fraud and two counts of wire fraud in a case involving the electric truck maker. Milton was found not guilty of an additional count of securities fraud.
Milton’s attorney said the verdict will be appealed. Milton was indicted in July 2021. He left Nikola in September 2020.
Prosecutors depicted Milton as a “con man” who sought to deceive investors about the electric- and hydrogen-powered truck maker’s technology starting in November 2019. The government alleged that Milton made false claims regarding nearly all aspects of Nikola’s business, including:
- That the company had early success in creating a “fully functioning” semi-truck prototype known as the Nikola One, when Milton knew the prototype was inoperable. Rather, the prototype was wholly missing significant parts, including gears and motors, and the control system was incomplete, the government said. Later, Milton published a video in which the Nikola One appeared to be driving on its own power down a road with no incline. In fact, to film these clips, the Nikola One was towed to the top of hill, at which point the “driver” released the brakes, and the truck rolled down the hill until being brought to a stop in front of a stop sign.
– Milton said that Nikola had created a “fully functioning” Nikola One truck prototype when in reality, the prototype was missing significant parts, including gears and motors. A video in which the vehicle appeared to be driving on its own power was staged by towing it to the top of hill and having it roll down until being brought to a stop.
- That Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology. The indictment said that Nikola purchased several Ford F-150 pickup trucks to use as “donor” or “surrogate” vehicles and used the vehicles’ chassis and bodies as the base for constructing the Badger prototypes.
- That Nikola was producing hydrogen and was doing so at a reduced cost. In fact, the government said Nikola never obtained a permit to produce hydrogen or installed the equipment necessary to produce hydrogen and at the time Milton was claiming that Nikola was producing hydrogen for less than $4 per kg, it was in fact purchasing hydrogen from a supplier for $16 per kg.
- That Nikola had developed batteries and other important components in-house, when in reality Nikola was acquiring those parts from third parties. Although Nikola partnered with various companies to try to develop proprietary battery technology, these efforts were not successful and Nikola has not successfully developed technology internally. The batteries it has planned to use in its semi-trucks were developed and manufactured by third parties.
- That claims that reservations made for the future delivery of Nikola’s semi-trucks were binding orders representing billions in revenue, when the vast majority of those orders could be cancelled at any time or were for a truck Nikola had no intent to produce in the near-term.
The government also said that Milton took advantage of the fact that Nikola went public by merging with a Special Purpose Acquisition Company (SPAC) rather than through a traditional IPO, by making many of his false and misleading claims during a period where he would have not been allowed to make public statements under rules that govern IPOs.
In a statement after Milton’s conviction, Nikola, which last year agreed on a $125 million settlement with the Securities and Exchange Commission, said it was “pleased to close this chapter” and said it will continue to work toward creating value for shareholders.