Federal prosecutors from the U.S. Attorney Office in the Southern District of New York charged Trevor Milton, the former executive chairman of Nikola Motors, with securities fraud for misleading retail investors about his company’s technical prowess and market potential.
Authorities arrested Milton in New York early Thursday morning.
Audrey Strauss, the acting U.S. Attorney for the Southern District of New York, said during a press conference Thursday, Milton deliberately set out to deceive what she described as “retail investors” by making claims he knew were false about Nikola products.
At one point, Milton went so far as to have his employees push a prototype of a Nikola Class 8 fuel-cell electric truck to the top of a hill and then let it roll down so it could be filmed in motion even though it had no moving parts and could not be driven, Strauss said.
Milton also showed off a pickup truck, the Badger, which General Motors offered to build, even though it was nothing more than a Ford F-150 fitted out with Nikola badging, Strauss said.
Milton’s legal team maintains he’s innocent of the charges and will be found not guilty.
“Trevor Milton is innocent; this is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified,” according to a statement from his legal team.
“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.
Milton also claimed to have “billions of dollars” in sold orders for the Nikola semi truck even though, in reality, he had none as part of a scheme to enrich himself by taking the company he founded in 2015 public through a SPAC deal, Strauss said.
Strauss said Milton also exploited regulations around the special purpose acquisition companies, which start life as publicly traded companies with no specific products or services to sell. Unlike in an IPO, or initial public offering, executives involved in a SPAC are not subject to a “quiet period” where they cannot say anything publicly about a company’s prospects. Milton used social media platforms to lure in retail or so-called “Robinhood Investors,” without any real knowledge of the company’s genuine value.
Federal postal inspectors reviewed Milton’s various social media post to help build the case against him, Strauss said.
Milton resigned executive chairman in September 2020 after it became apparent the company was not able to deliver on its promises and the Nikola stock lost 40% of its value, causing serious financial hard to many small investors, Strauss said.
Milton still facing wrath of SEC
In addition to the criminal charges filed by federal prosecutors, Milton also is facing a civil suit by the U.S. Securities and Exchange Commission, which says Milton deliberately set out to exploit gullible investors.
The hope is their lawsuit will serve as a warning and deter misconduct in the SPAC market.
Federal prosecutors from the Southern District of New York and the SEC’s enforcement division are also looking at possible misconduct around the SPAC that turned Lordstown Motors into a publicly traded company. No charges have been filed against any former or current Lordstown executives or backers.