Following months of investigations, Nikola’s disgraced founder Trevor Milton has been charged with three counts of fraud, TechCrunch reports.
The probe began last year following claims that Milton had lied about Nikola’s progress developing a semi-truck powered by a hydrogen fuel cell. Milton initially denied the claims, but failed to convincingly rebut them with proof. The controversy saw a major partnership with General Motors evaporate and Milton forced out of his own company.
Nikola is worth less than $5 billion today, from a peak of $30 billion in September of last year.
The U.S. Attorney’s Office in Manhattan specifically hit Milton with two counts of securities fraud and wire fraud for using social media and TV appearances to flood “the market with false and misleading information about Nikola.”
Nikola released a statement today distancing itself from Milton, saying that he has not been involved in operations since resigning last September. But today’s indictment still doesn’t bode well for the electric car upstart, as it seems to confirm a fraud was ongoing for years. Nikola still hasn’t reached production and faces significant hurdles, like developing hydrogen fueling infrastructure.
Rise and fall — “In order to drive investor demand for Nikola stock, Milton lied about nearly every aspect of his business,” Manhattan U.S. Attorney Audrey Strauss said at a news conference Thursday. A separate complaint filed by the Securities and Exchange Commissions alleges that Milton repeatedly made false statements about core aspects of Nikola, including claiming in a podcast last July that the company had obtained “billions and billions of dollars” in committed truck orders, while in regulatory filings it said it had just one customer with an order for 800 trucks.
Nikola went public last year through a complex merger, and managed to raise nearly a billion dollars from investors on excitement for promising electric car startups. But it has never produced a single vehicle, and it eventually came out that a prototype truck Milton said was fully operational when it was actually just rolled down a hill. As a public company, Nikola has an obligation to be truthful and avoid publicizing any information that could mislead investors and lead them to pour money in based on a false premise.
Pump and dump — Milton has always seemed like someone who tried to imitate the showmanship of Tesla’s Elon Musk. But Milton blurred the lines between fact and fiction, whereas Tesla actually made vehicles and, at best, Musk was overambitious about his timelines. That’s not great either but Tesla at least sold its first car, the Roadster, before ever going public, largely relying on funds directly from Musk himself to get to production. If a rich person like Musk loses his money on a risky bet, regulators don’t much care. But they are tasked with ensuring everyday people know what they’re getting into when they bet on public companies, or else nobody would have faith to support American industry.
Why anyone would still remain an investor in Nikola is anyone’s guess. Maybe longtime investors have accepted they’ve probably lost their money and are just gambling that Nikola is actually able to reach production and fulfill its promise of disrupting the trucking industry with zero-emissions vehicles. But Tesla is the only upstart electric automaker that’s found true mass-market success thus far, and among the speculative bets out there, Nikola feels like a particularly dubious one.
Since the news of Milton’s indictment came out, Nikola’s stock has fallen 15 percent. Despite wiping out billions in value, Milton still managed to walk away with billions worth of stock, tens of millions of dollars worth he was allowed to sell immediately. This is all because Milton was, and still is, the largest shareholder in Nikola. But the scam is catching up to him now. If Milton is found guilty, it should serve as a wakeup call to founders that “fake it till you make it” isn’t a free pass to egregiously lie. Hopefully regulators are able to get a stiff penalty.
Milton is now out free on $100 million bail, which was secured by two properties he owns in Utah worth a combined $40 million.