Milton, 39, who
“In order to drive investor demand for Nikola stock, Milton lied about nearly every aspect of the business,” U.S. Attorney for the Southern District of New York Audrey Strauss said in a press conference.
In a separate complaint filed Thursday, the Securities and Exchange Commission said, “Milton sold a version of Nikola not as it was -- an early-stage company with a novel idea to commercialize yet-to-be proven products and technology -- but rather as a trail-blazing company that had already achieved many groundbreaking and game-changing milestones.”
“Trevor Milton is innocent,” his lawyers said in a statement. “This is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified.”
That Milton would plead not guilty despite his company already
Social-media use was a mainstay of Milton’s tenure. After a short seller’s report in September, he issued a long series of Instagram posts berating the author and other critics of the company. He
Nikola said in a statement that it has cooperated with the investigation. “Today’s government actions are against Mr. Milton individually, and not against the company,” it said.
Nikola’s sudden rise and dramatic fall kicked off a trend. Other startups including
Dramatic Fall
Nikola went public through a reverse merger with a blank-check company
Days after the startup’s shares debuted, Bloomberg News reported that Milton had
Nikola initially
The fallout from the accusations has forced Nikola to curtail its ambitions. A deal with
Nikola’s market capitalization has plunged from almost $29 billion in June last year to about $5 billion currently. Milton is the company’s largest shareholder with stake of around 20% of the company directly, according to data compiled by Bloomberg. He also owns additional shares through a joint entity called T&M Residual with
Social Media Usage
The SEC says Milton was “intensely focused” on the company’s stock price,
Gurbir Grewal, the SEC’s head of enforcement, said Thursday the case was about the obligations of corporate officers to provide complete and accurate information about their companies’ operations. “Corporate officers cannot say whatever they want on social media in violation of federal securities laws,” he said.
Around the time of the merger, Milton tweeted about a battery-powered pickup called the
“For example, on June 25, 2020, Milton sent a series of tweets from his personal account in which he claimed that Nikola would offer a drinking fountain in the Badger. This information came as a complete surprise to Nikola’s designers, engineers, and marketing personnel. When informed of the tweets, one engineer questioned whether ‘this [is] a joke,’ a marketing employee wrote that his ‘head is fuzzy,’ and a designer texted, ‘[u]hhhhh what.’”
Among the false and misleading statements Milton made, according to the federal indictment:
- That the company had a “fully functioning” semi-truck prototype known as the Nikola One, despite the fact that Milton knew that the prototype was inoperable
- That Nikola had engineered and built an electric- and hydrogen-powered pickup truck, the Badger, from the “ground up” using Nikola’s parts and technology, which he knew was not true
- That Nikola was producing hydrogen and was doing so at a reduced cost, when “no hydrogen was being produced at all by Nikola, at any cost”
- That Nikola had developed batteries and other important components in-house, when they were buying them from third parties
- That reservations for Nikola’s vehicles were binding orders representing billions in revenue, when they were actually able to be canceled at any time, “and were for a truck Nikola had no intent to produce in the near-term”
Production Progress
Beyond Nikola’s technology, Milton and other executives’ statements contained discrepancies and exaggerations about the company’s progress toward production.
In July 2020, Milton tweeted that construction would start on the company’s Coolidge, Arizona, plant just days after groundbreaking. This followed a comment by Mark Duchesne, Nikola’s head of global manufacturing, who told reporters on July 22 that construction would start the following day. However, this would not have been possible because Nikola only held a “temporary use” permit that allowed for limited ground clearing and safety measures to facilitate the groundbreaking event. It did not have the required permits to start construction, Bloomberg
In a similar stretching of words, Milton told a podcast that month that its European partner Iveco was already producing vehicle prototypes that were “coming off the assembly line right now in Ulm, Germany.” This was echoed by the company’s chief executive officer Russell on an Aug. 4 on an earnings call where he stated that the prototypes were “coming off the end of the facility at this point.”
While prototypes were being made in Germany, Bloomberg reported in September that the assembly line was not in fact operable and the facility was still under construction, two months after Milton’s original statement. The prototypes were being built by hand in a nearby workshop on the site, not on the assembly line. On Thursday, Nikola
EV Startup Scrutiny
Nikola was among the first EV startups that attracted attention from investors last year as possible rivals to market leader
Lordstown’s boasts about non-binding orders gave way to
Canoo
(Updates with closing share price. An earlier version corrected spelling and title of acting U.S. attorney)
--With assistance from
To contact the reporters on this story:
To contact the editors responsible for this story:
Silvia Killingsworth
© 2021 Bloomberg L.P. All rights reserved. Used with permission.
To read more articles log in. To learn more about a subscription click here.