Nikola Founder and Former CEO Charged in Securities Fraud Scheme

The founder and former CEO of Nikola Corporation, a Tesla competitor, was charged in a securities fraud scheme in the Southern District of New York on Thursday. Trevor Milton is accused of defrauding and misleading investors about the development of his company’s products and technologies in order to drive investor demand.

Nikola is a zero-emissions truck company that made headlines last year when its $2 billion deal with General Motors fell through after allegations of fraud surfaced. Specifically, a report from a short-seller firm, based on conversations with an anonymous former employee, accused the company of staging a promotional video in which its truck appeared to be moving by its own propulsion. In actuality, the report stated, “Nikola had the truck towed to the top of a hill on a remote stretch of road and simply filmed it rolling down the hill.”

Thursday’s unsealed indictment includes allegations that Milton targeted individual, non-professional investors with false and misleading statements through social media and television, print, and podcast interviews that implied Nikola had already developed fully functioning prototypes. In addition to false statements about the Nikola One, featured in the promotional video, the indictment also alleges that Milton made false and misleading statements about “the Badger,” a supposed electric- and hydrogen-powered pickup truck that Milton also knew was not built “from the ground up” as he implied and even lacked basic features such as airbags.

The indictment further accuses Milton of falsely claiming the company was producing hydrogen at below-market prices, was building its own batteries and other components, and had obtained “billions and billions and billions and billions” of dollars worth of binding truck orders for fulfillment, all of which he knew to be untrue.

Some investors in Nikola, the indictment states, had no prior stock market experience and had begun trading during the COVID-19 pandemic to replace or supplement lost income. The indictment asserts that some of these investors suffered tens and hundreds of thousands of dollars in losses, including retirement savings or borrowed funds. At one point, Milton’s shares of Nikola stock were worth at least $8.5 billion. The value of Nikola stock plummeted once Milton’s misleading statements came to light in September 2020, though certain institutional investors with access to more complete information had been able to sell their shares for a significant profit.

Nikola itself was not charged with any wrongdoing. The company stated that Milton had not been involved in operations or communications since his resignation in September 2020 and that Nikola had cooperated with the government throughout the course of its investigation.

Milton, who pleaded not guilty, faces two counts of securities fraud and one count of wire fraud, which carry a maximum of 20 to 25 years in prison each.

Additional Reading

Former Nikola Corporation CEO Trevor Milton Charged in Securities Fraud Scheme, United States Department of Justice (July 29, 2021)

Nikola Founder Trevor Milton Charged With Lying to Investors, The Wall Street Journal (July 29, 2021)

Nikola founder charged with securities fraud over allegedly fake truck demo, The Verge (July 29, 2021).

Securities Fraud Law, Justia

Wire Fraud Law, Justia

Image Credit: T. Schneider /