Update: Nikola Founder Trevor Milton Pleads Not Guilty On 3 Fraud Charges

As U.S. Attorney Audrey Strauss began citing the numerous lies alleged against Nikola founder Trevor Milton during a Thursday news conference to discuss the grand jury indictment, she utilized an apt phrase given his former company's position as a green-vehicle maker.

"Today's criminal charges against Milton," she said, "are where the rubber meets the road."

That road, at least for Milton, will prove extremely difficult to navigate if federal prosecutors succeed in proving their case, one in which they claim he "lied about nearly every aspect of the business" in order to drive investor demand for Nikola stock.


CLICK HERE FOR THE 49-PAGE INDICTMENT


The first big legal step was taken Thursday morning when Milton was charged with three counts of fraud by the U.S. Attorney's Office in Manhattan in connection with the investigation into the electric vehicle startup. The charges involved two counts of securities fraud and one count of wire fraud.

Milton was taken into custody in the morning, then appeared in front of Magistrate Judge Sarah Netburn in the Southern District of New York on Thursday afternoon. He pled not guilty to all three charges and was freed on a $100 million bond.

His attorneys also released a statement that read, in part: "Trevor Milton is innocent; this is a new low in the government's efforts to criminalize lawful business conduct. Every executive in America should be horrified."

According to Bloomberg, the bail was secured by two properties in Utah owned by Milton — one worth $36 million, the other worth $4 million. 


WATCH: ‘A bad, bad day for Trevor Milton'


In addition to the criminal charges, civil charges were filed by the Securities and Exchange Commission for "repeatedly disseminating false and misleading information typically by speaking directly to investors by social media about Nikola's products and technological services," according to Gurbir Grewal, the SEC's director of the Division of Enforcement.

Nikola was quick to distance itself from Milton, issuing a statement that read, "Trevor Milton resigned from Nikola on September 20, 2020, and has not been involved in the company's operations or communications since that time. Today's government actions are against Mr. Milton individually and not against the company.  

"Nikola has cooperated with the government throughout the course of its inquiry. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company's manufacturing facilities."

Even so, the news was immediately felt on Wall Street, as Nikola's NKLA share price dropped 10% in the first 40 minutes of trading Thursday and was still down 9% halfway through the day.

Meanwhile, the SEC investigation is still ongoing and Nikola could get fined for its days under Milton.

While many events pertaining to Milton unfolded Thursday, prosecutors said their case against him was quite simple — that he spewed a seemingly never-ending series of lies about his company in order to enhance the value of Nikola's stock and increase his own personal value.

Philip Bartlett, inspector-in-charge at the U.S. Postal Inspection Service, said that in his 33-year career, he had come to "learn there are three characteristics of fraudsters — they're liars, they're frauds and they're cheats."

"In this case, a fraud was committed with the defendant allegedly misleading the progress and viability of certain hydrogen and battery-powered trucks. … He lied to investors and lured them into believing the company had already developed viable prototypes that were ready to be produced.

"Thousands of investors relied on this false information to purchase company stock. During the days following Milton's resignation from Nikola, the company lost approximately 40% of its value and individual investors were cheated out of hundreds of thousands of dollars."

Added Grewal, "This case is about the obligation of corporate officers like Milton to provide complete truthful and accurate information at all times while discussing their company's affairs. There is no end-around or exception to this obligation. This case also demonstrated that corporate officers cannot say whatever they want on social media without regard for the federal securities laws."

In summing up the indictment, Strauss said, "At the bottom, this is a very straightforward case. Milton told lies to generate popular demand for Nikola's stock."

Yet, Milton's legal team will argue just the opposite.

"Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry," his attorney's statement read. "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. From the beginning, this has been an investigation in search of a crime. Justice was not served by the government's action today, but it will be when Mr. Milton is exonerated."

The indictment focused on the time frame between November 2019 to September 2020 and said that Milton schemed to defraud investors into buying Nikola shares through statements about the company's product and technology development.


WATCH: Prosecutors discuss charges vs. Milton


Among the "false and misleading statements" cited in the indictment:

  • The company had early success in creating a "fully functioning" semi-truck prototype known as the Nikola One, although Milton knew that the prototype was inoperable.
  • Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as the Badger from the "ground up" using Nikola's parts and technology, but Milton knew that was not true.
  • Nikola was producing hydrogen and was doing so at a reduced cost, when Milton knew that in fact no hydrogen was being produced at all by Nikola, at any cost.
  • Nikola had developed batteries and other important components in-house, when Milton knew that Nikola was acquiring those parts from third parties.
  • Reservations made for the future delivery of Nikola's semi-trucks were binding orders representing billions in revenue, but the vast majority of those orders could be canceled at any time and were for a truck Nikola had no intent to produce in the near term.

Milton resigned as Nikola's executive chairman and gave up his board seat Sept. 20, 2020. Ten days earlier, short-seller Hindenburg Research published a scathing 67-page report accusing Milton of fraud and deception by overstating technology claims before the company went public.

The report, titled "Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America," cited numerous false assertions about Nikola's technology, including producing a video in which a truck was rolled down an incline in order to create the appearance of a working prototype.

The Hindenburg accusations on Sept. 10 came two days after Nikola announced a manufacturing partnership and supply deal with General Motors Co. GM. The automaker would provide battery and fuel cell technology and build the Nikola Badger electric pickup truck in exchange for an 11% stake in the company. 

When he left the company as executive chairman in September, Milton agreed to vote his shares according to the desires of the board of directors and do nothing to seek to regain the board seat he gave up or support anyone for a board seat other than board recommendations.

Those assurances earned Milton a speedup of vesting in 600,000 additional shares of Nikola stock. In early June of 2020, Nikola's stock reached its all-time high of 93.99 a share. With Milton owning 91,602,734 shares, his paper worth at that point was $8,609,740,968.66, getting him close to deca-billionaire status.

FreightWaves staffers Alan Adler and Brian Straight contributed to this report.

More articles on Trevor Milton

Trevor Milton making good on stock pledge to early Nikola employees

Trevor Milton rakes in $49M in sale of 3.5M Nikola shares

Nikola founder whittles holdings in electric truck startup

Trevor Milton can dump his Nikola stock on Tuesday — will he?

Image by David Mark from Pixabay

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