The founder of high-profile electric truck maker Nikola Corp. NKLA,
has been accused of lying to investors about alleged technological breakthroughs the company made to boost its stock price, federal prosecutors said Thursday.
Trevor Milton, 39, is accused of claiming his company had successfully made working prototypes of electric trucks and vans that would have shaken up the industry, when he had, in fact, never built anything.
“Basically, it’s a very simple case: Milton told lies to generate popular demand for his actions,” said Audrey Strauss, the US prosecutor for the Southern District of New York.
At public events, the prototype vehicles were towed into position and were powered by plugs from hidden wall outlets.
Milton resigned Nikola in September when it emerged the Justice Department opened an investigation into the startup and its founder into possible false allegations. Milton previously tweeted that he intended to defend himself against “false allegations”.
Prosecutors said Milton was arrested in Manhattan on Thursday. He could not be immediately reached for comment. In a statement, Nikola said the indictment targeted Milton and not the company, and noted that he had not been involved with the company since last year.
“Nikola has cooperated with the government throughout its investigation. We remain committed to our previously announced milestones and timelines and focus on delivering the Nikola Tre battery-powered electric trucks later this year from the company’s manufacturing facilities, ”the statement said.
In the indictment, federal prosecutors said Milton had for years exaggerated the technological developments made by the company, claiming that it had built working prototypes of its Nikola One truck and Badger pickup truck from parts that the company had made entirely by itself.
To make the prototype truck look like it was driving, it was towed to the top of a hill and then rolled all the way down, prosecutors said.
Prosecutors said that in fact the prototypes that had been unveiled did not work and were Frankenstein monsters cobbled together from parts of other vehicles. At public events, vehicles were towed into position and were powered by plugs from hidden wall outlets.
In one case, in which the vehicle was filmed for promotional film, duct tape was used to prevent the doors of a prototype truck from opening, prosecutors said. To make the truck appear to be driving, it was towed to the top of a hill and then rolled down, according to the indictment.
Milton has reportedly stated publicly on several occasions that the prototypes are fully operational and overestimated the number of pre-orders the company has received.
In June 2020, the company went public through a blank check company, or SPAC, called VectoIQ Acquisiton. Prosecutors said that because the company had not been made public through a traditional IPO, Milton was not bound by traditional post-listing “silence period” decisions, and was able to make wacky public statements on social media about the company’s success in order to drive up the share price by attracting retail investors.
Among the retail investors who ultimately invested in Nikola were investors who had no prior stock market experience and had started trading during the COVID-19 pandemic to replace or supplement the loss of income or to occupy their time during lockdown, ”the indictment reads. .
Prosecutors said that during the initial period after Nikola began public trading, Milton’s shares rose in value by $ 7 billion. After it emerged, the company was investigated, shares plummeted, causing many retail investors to lose tens or even hundreds of thousands of dollars, prosecutors said. In some cases, some investors have lost a substantial portion of their retirement savings, they said.
The Securities and Exchange Commission is leading a parallel civil complaint. “Having chosen to promote Nikola through social media, Milton was obligated under securities laws to communicate fully, accurately and truthfully,” said Gurbir Grewal, director of the SEC’s Division of Enforcement, on Thursday. . “This obligation exists for all heads of public enterprises, even those whose enterprises have only recently entered the public market through PSPC transactions. “