Nikola founder Trevor Milton has been charged with securities fraud in federal court in the Southern District of New York on Thursday. According to the allegations, Milton made a series of materially false representations that depicted Nikola, an electric car startup, as being far closer to producing a working product than it actually was, resulting in a $500 million investment.
According to the indictment, “Milton marketed a version of Nikola that was not what it was – an early-stage business with a new idea to sell yet-to-be proved products and technologies – but as a trail-blazing company that had already accomplished several innovative and game-changing milestones.”
The indictment claims that Milton utilized a produced film to provide the misleading appearance that its Nikola One semi-truck prototype could move on its own power when, in reality, it was only rolling downhill. According to the indictment, Milton also allegedly stated that the firm was generating its own hydrogen fuels at below-market costs and had secured “billions and billions and billions and billions” of dollars in committed truck orders.
Nikola, a potential Tesla competitor, surged to prominence in 2020 with plans for a hydrogen fuel cell-powered pickup truck and tractor-trailer cab. The vehicles' popularity peaked in September of that year when General Motors announced a $2 billion plan to buy a share in the firm and help with the launch of its Badger pickup truck.
The enthusiasm was short-lived, as a report by short-seller firm Hindenburg Research accused the corporation of fraud less than a week after the plans were disclosed. The article claimed that a well-publicized demonstration had been staged to create the appearance that Nikola's vehicle could move on its own, based on talks with an unnamed former employee. “Nikola had the vehicle pulled to the top of a hill on an isolated stretch of road and just recorded it rolling down the slope,” according to the report.
This assertion is echoed in the indictment. Prosecutors claim that Nikola's top engineer warned Milton a few weeks before the event that the truck would not be functional at the unveiling ceremony unless it was postponed. “Milton took the choice to go forward with the unveiling despite the fact that the vehicle would not be operational.”
The indictment states that the truck's movement was caused by rolling down a hill and that the "towing-and-rolling procedure" was done three times to create a video for the company's ad. Some footage was also sped up in post-production, giving the impression that the Nikola One was moving quicker. “Behold, the Nikola One in motion,” Nikola captioned the final version of the video on the company's official YouTube, Facebook, and Twitter accounts.
The indictment also goes into further detail about how defective the vehicle was. The fuel cell and hydrogen gas storage tanks had not been installed, the air compressor and turbine had not been commissioned, the gearboxes had not been constructed, and the vehicle-level controls had not been completed, according to prosecutors. The lawsuit also claims that the dashboard interface Milton used to start the truck was an off-the-shelf tablet that was not linked with the vehicle's systems in any manner.
The Securities and Exchange Commission was investigating Nikola, according to Hindenberg's report, however, the SEC declined to acknowledge the inquiry at the time.
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