Last summer fuel cell electric truck manufacturer Nikola Corp. was riding high after going public in June and breaking ground on its greenfield plant in the Arizona desert. Now founder and former CEO and chairman Trevor Milton is charged by the U.S. Department of Justice (DOJ) with two counts of securities fraud and one count of wire fraud “in connection with his scheme to defraud and mislead investors about the development of products and technology by the company he founded, Nikola Corporation,” according to the DOJ.
He surrendered himself on July 29 and was freed on a $100 million bail.
According to the indictment, the 39-year-old Milton defrauded investors “through false and misleading statements regarding Nikola’s product and technology development” on virtually every medium, from print to podcasts.
“As alleged, Trevor Milton brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola’s trucks and technology,” said Manhattan U.S. Attorney Audrey Strauss. “But today’s criminal charges against Milton are where the rubber meets the road, and he now will be held accountable for his allegedly false and misleading statements to investors.”
A statement by Milton’s lawyer said: “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.”
The DOJ accused Milton of specifically targeting retail investors, though many bought Milton’s pitch. A Seeking Alpha analysis speculated that Nikola, worth $11 billion at the time (right before Nikola went public) could someday grow to $50 billion. That author assumed Nikola would make its ambitious production start date and put out 12,000 hydrogen-powered Class 8 tractors by 2024.
The indictment accused Milton of lying about “nearly all aspects of Nikola’s business,” including:
The Nikola One as being fully functional in 2016, though it was inoperable. Several components, such as gears and motors were missing, and the infotainment system was actually a laptop that displayed the speedometer and map.
That Nikola built and engineered the Badger pickup truck, which would have the option of either battery-electric or fuel cell powertrain. The Ford F-150 was used as a base and Milton allegedly ordered engineers to obfuscate the Ford chassis and body.
The company was producing hydrogen at $4 per kilogram, a fourth of the going rate. Nikola had not gotten any permits to produce hydrogen nor did it have any equipment to produce the fuel.
Inspector-in-Charge of the New York Division of the United States Postal Inspection Service Phillip R. Bartlett said: “This defendant allegedly concealed the progress and success of Nikola’s technology, when he lied to investors and lured them into believing that they had invested at the ground floor of a company that had already developed viable Nikola One and Badger prototypes that were ready to be produced. The one thing fraudsters have in common—they’re liars, cheaters, and thieves.”
The backstory
Milton’s fall from grace began in September of 2020 when short-seller Hindenburg Research dropped a report with all the damning explosiveness of a hydrogen bomb. In the detailed report, the short seller listed dozens of potential lies both large and small, from rolling a powerless Nikola truck down a hill to make it look like the powertrain worked, to using off-the-shelf components and claiming they were developed in-house.
This report came a few days after Nikola announced a huge deal with General Motors that would have made GM the manufacturer of Nikola’s zero-emission pickup truck called the Badger, as well as the supplier of the Class 8 trucks’ fuel cells. GM would get an 11% stake in Nikola. This partnership meant that running trucks on hydrogen, which offers similar range to diesel trucks but without the emissions, was within reach. The report, even if most accusations were untrue, poisoned the well of investor confidence, and the stock (Nasdaq: NKLA) dropped more than 50% from August to October.
Milton ‘voluntarily’ left the company and GM eventually renegotiated and scaled down the strategic partnership. Nikola the company has been plugging along in the aftermath, building up the factory and hydrogen infrastructure; Milton faded from the public view, though still holding 20% ownership of the Nikola.
The U.S. Securities and Exchange Commission and DOJ both started digging deeper into Milton, based on the accusations of fraud and amount of investors who trusted Milton only to lose “tens and even hundreds of thousands of dollars in losses, including, in certain cases, the loss of their retirement savings or funds that they had borrowed to invest in Nikola,” the indictment reported.
Milton's laywer maintains his client's innocence, asserting “This is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified.”
