Trevor Milton, Nikola founder, indicted by grand jury on three counts of fraud

A federal grand jury charged Nikola founder Trevor Milton with three counts of criminal fraud for lying about “nearly all aspects of the business” to bolster stock sales of the electric vehicle start-up, according to an indictment unsealed Thursday.

The U.S. Attorney’s Office in Manhattan accused the 39-year-old billionaire, who resigned as chairman in September, with two counts of securities fraud, including making false statements about the company, and wire fraud.

The Securities and Exchange Commission also filed civil securities fraud charges against Milton on Thursday. The SEC asked the U.S. District Court of the Southern District of New York to permanently bar him from acting as an officer at a company that issues securities, to disgorge all ill-gotten gains and pay a fine.

“This is a very straightforward case, Milton told lies to generate popular demand for Nikola stock, Beginning at least in or about March 2020, when Nikola announced that its stock would become publicly listed, Milton became increasingly preoccupied with keeping Nikola’s stock price high,” U.S. Attorney Audrey Strauss told reporters at a press briefing Thursday.

Milton maintains that he’s innocent. His legal team, led by Brad Bondi, said Milton was “wrongfully accused following a faulty and incompetent investigation,” and that justice won’t be served until he’s exonerated, according to an emailed statement sent Thursday.

Read the full statement from Milton’s legal team:

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.

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. 

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. 

Milton pled not guilty to the criminal charges in a Manhattan courtroom Thursday afternoon. He was freed on a $100 million bond secured against two of his properties in Utah. He is barred from contacting investors. 

Prosecutors said Milton built an intricate scheme designed to pump up the company’s stock for his own gain by lying about the company’s products, technology and future sales prospects. They accuse him of using Nikola’s deal to go public via a special purpose acquisition company to target amateur retail investors, some of whom lost hundreds of thousands of dollars.

“Milton’s scheme targeted individual, non-professional investors — so-called retail investors — by making false and misleading statements directly to the investing public through social media, and television, print and podcast interviews,” according to the 49-page indictment. 

The grand jury said Milton should forfeit all property “traceable to the commission of said offenses,” which would likely include the more than $1 billion he earned when Nikola went public in June 2020.

Nikola’s stock plunged 15.2% to $12.03 a share Thursday. That’s a steep drop from its all-time high of $93.99 on June 9, 2020, days after the company went public.

John Coffee, a securities law professor at Columbia University,  said it would likely be in Milton’s best interest to seek a plea deal. He said the claims made by federal prosecutors “are not nuanced ones over which there can be a reasonable argument.”

“If he is rational, Mr. Milton should seek a plea bargain,” he said in an email to CNBC.

Milton, who was the company’s largest shareholder, held roughly $8.5 billion in Nikola stock at the height of the company’s value. At one point last summer, Nikola’s valuation surpassed Ford Motor, topping $31 billion.

The grand jury said Milton should forfeit all property “traceable to the commission of said offenses,” which would likely include the more than $1 billion he earned when Nikola went public in June 2020.

Prosecutors said Milton “was motivated to engage in the fraudulent scheme in order to enrich himself and elevate his stature as an entrepreneur.”

Nikola said in an emailed statement that it has “cooperated with the government throughout the course of its inquiry.” The company emphasized that the allegations are against Milton and not Nikola.

“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,” the company said.

Many of the allegations regarding false and misleading statements were uncovered by short-seller Hindenburg Research.

In a report in September, Hindenburg accused Milton of making false statements about Nikola’s technology in order to grow the company and partner with auto companies. The report, titled “Nikola: How to Parlay An Ocean of Lies Into a Partnership With the Largest Auto OEM in America,” was released two days after the company announced a deal with General Motors that sent both companies’ shares soaring. The short-seller characterized Nikola as an “intricate fraud built on dozens of lies” by Milton.

Following an internal investigation, Nikola said in February that it found Milton made several inaccurate statements from 2016 through the company’s IPO that misled investors.

CEO and founder of U.S. Nikola, Trevor Milton speaks during presentation of its new full-electric and hydrogen fuel-cell battery trucks in partnership with CNH Industrial, at an event in Turin, Italy December 2, 2019.

Massimo Pinca | Reuters

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