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Former Nikola Chairman Trevor Milton has been charged with multiple counts of fraud by a federal grand jury.

The case against Milton alleges:


1. Trevor R. Milton, the founder, largest stockholder, and former Chief Executive Officer and Executive Chairman of Nikola Corporation (“Nikola”), a publicly traded company, engaged in a fraudulent scheme to deceive retail investors about Nikola’s products, technical advancements, and commercial prospects for his own personal benefit in violation of the federal securities laws. Milton did so primarily by leveraging his social media presence and frequent appearances on television and podcasts to flood the market with false and misleading information about Nikola.

2. Milton founded Nikola in 2015 with the primary goals of manufacturing semitrucks that run on alternative fuels with low or zero emissions and building an alternative fuel station infrastructure to support those vehicles. To accomplish these goals, Nikola needed to Case 1:21-cv-06445 Document 1 Filed 07/29/21 Page 1 of 65 2 raise billions of dollars to develop vehicles and infrastructure that had never before been developed or adopted on a commercial scale. Over the course of several private offerings, and then in connection with a business combination with a special purpose acquisition company (“SPAC”), Nikola raised more than $1 billion dollars, most of it from institutional investors. After entering into a business combination with the SPAC, Nikola began trading on the Nasdaq Global Select Market (“Nasdaq”).

3. Before Nikola had produced a single commercial product or had any revenues from truck or fuel sales, Milton embarked on a relentless public relations blitz aimed at a class of investors he called “Robinhood investors.” Through frequent nationally televised media appearances and a ubiquitous presence on social media (where he garnered over 100,000 followers on Twitter alone), Milton built a significant following for himself and Nikola. In these appearances and on social media, Milton presented himself as a different type of CEO – one who “cared” and was “transparent” with the average investor. As part of his publicity campaign, Milton encouraged prospective investors to follow him on social media to get “accurate information” about the company “faster than anywhere else.” In reality, however, Milton used his platform to mislead investors, which helped inflate and maintain Nikola’s stock price.

4. From approximately November 2019 through September 2020, Milton’s statements in tweets and media appearances, individually and taken together, painted a picture of Nikola that diverged widely from its then-current reality. 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. In presenting his version of Nikola to investors, Case 1:21-cv-06445 Document 1 Filed 07/29/21 Page 2 of 65 3 Milton repeatedly made false and misleading statements about core aspects of Nikola’s products, technological advancements, and commercial prospects, including, among others:

(a) Falsely claiming that Nikola’s first semi-truck prototype, the Nikola One, could be driven under its own power, and using a misleading video to create the false impression that the Nikola One was, in fact, driving under its own power;

(b) Falsely claiming that Nikola was producing hydrogen, that it was doing so at a cost that was four times less than the prevailing market rates, and that it had obtained electricity at costs that made hydrogen production profitable;

(c) Falsely claiming that Nikola had significantly developed or already completed a prototype of an electric pickup truck, the Badger, and that this vehicle used primarily Nikola’s proprietary components;

(d) Falsely claiming that Nikola had obtained “billions and billions and billions and billions” of dollars of committed truck orders;

(e) Falsely claiming that Nikola had developed a “game-changing” battery technology and that Nikola was manufacturing and developing multiple key vehicle components “in-house”; and

(f) Falsely claiming that the total cost of ownership of Nikola’s trucks was 20-30 percent below that of diesel vehicles.

5. At the time he made the misstatements identified above, Milton knew or was reckless in not knowing that Nikola had not accomplished what he claimed. Instead, much of what Milton represented as accomplishments were, at best, internal targets years away from completion and subject to significant execution risks or, worse, ideas conceived only on paper. Case 1:21-cv-06445 Document 1 Filed 07/29/21 Page 3 of 65 4 As a result, Milton made numerous materially false and misleading statements about critical aspects of Nikola’s business.

6. Milton’s false and misleading statements generated significant interest among many of the retail investors who followed him on social media, watched or listened to his interviews, and purchased Nikola’s stock.

7. Milton had motive to lie about the company’s accomplishments, given his position as Nikola’s largest stockholder and his compensation structure, which provided the opportunity for additional stock awards by maintaining a run-up in Nikola’s stock price. As detailed below, upon the completion of the Business Combination, Milton held approximately 25 percent of Nikola’s stock and further stood to earn millions more shares if Nikola’s stock reached certain price milestones and remained at each milestone for a specified period of time. Milton ultimately reaped tens of millions of dollars in personal benefits as a result of his misconduct.

8. Milton violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Commission seeks (i) permanent injunctive relief; (ii) disgorgement of illgotten gains and prejudgment interest thereon; (iii) civil penalties; (iv) an officer and director bar; and (v) such further relief the Court may deem just and appropriate.
 

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I didn't realize that he was found guilty of fraud last week!


Trevor Milton, the founder and former chairman and CEO of electric heavy truck maker Nikola, was found guilty in federal court Friday of three of four counts of fraud relating to false statements he made to drive up the value of Nikola’s stock.

Milton was charged with two counts of securities fraud and two counts of wire fraud, all related to statements he made about Nikola’s business while he was chairman and CEO of the company. Jurors found him guilty on one count of securities fraud and both of the wire fraud counts.

Milton will be sentenced on Jan. 27. He faced up to 25 years in prison if convicted on all four counts.

“Trevor Milton lied to Nikola’s investors — over and over and over again. That’s fraud, plain and simple,” said Damien Williams, the U.S. Attorney for the Southern District of New York. Williams said that the case against Milton should “serve as a warning” to others who make misrepresentations to investors.

“It won’t end well,” he said.

WIlliams’ office in Manhattan had alleged that Milton lied about “nearly all aspects of the business” he founded in 2014 during his time leading the company. Those lies, prosecutors said, were intended to induce investors to bid up the price of Nikola’s stock.

“On the backs of those innocent investors taken in by his lies, he became a billionaire virtually overnight,” Assistant U.S. Attorney Nicolas Roos said in his opening statement in September.

Nikola’s stock price briefly surged to over $90 per share in June 2020, just days after it went public via a merger with a special purpose acquisition company. For a short period, Nikola — a company with no revenue — was more valuable than century-old Ford Motor.

That ambitious valuation didn’t last. Nikola’s shares fell sharply once Milton was forced out of the company in September 2020, after the company’s board of directors found that some of the fraud allegations made by short-seller Hindenburg Research had merit.

The U.S. Department of Justice and the Securities and Exchange Commission both opened investigations in the months following Milton’s departure. In July 2021, a grand jury indicted Milton on three counts of fraud; a fourth count was added in June 2022.

Nikola itself wasn’t facing charges in this case. The SEC had brought related civil charges against the company last year. Those charges were settled in December after Nikola agreed to pay a $125 million fine. Although Milton still owns Nikola stock, the company had otherwise cut ties with him.
 
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