© Reuters. FILE PHOTO: CEO and Founder of US Nikola Trevor Milton attends a press conference to showcase its new all-electric and hydrogen fuel cell battery trucks in partnership with US Nikola at an event in Turin, Italy on December 3, 2019. REUTERS / Massimo
By Jonathan Stempel and Ben Klayman
NEW YORK (Reuters) – Trevor Milton, the billionaire founder and former CEO of Nikola Corp, was charged Thursday with fraud against investors by lying to them about the electric and hydrogen truck maker.
Milton, 39, confessed to two securities fraud and one wire transfer fraud case at a Manhattan federal court hearing for statements he made about Nikolas products and technology from November 2019 to September 2020.
Authorities said Milton relied on a PR lightning bolt from social media posts as well as TV and podcast interviews to boost Nikola's stock price, become one of the world's 100 richest people, and his position as an entrepreneur to lift".
"Milton lied in almost every aspect of the business," said US Attorney Audrey Strauss at a press conference in Manhattan. "With today's criminal charges against Milton, the rubber hits the street."
A judge allowed Milton to release a $ 100 million bond that was partially backed by two homes owned by the Oakley, Utah resident.
Every criminal complaint carries a maximum imprisonment of 20 or 25 years. The US Securities and Exchange Commission filed a civil action to this effect.
"Trevor is innocent," Milton's lawyer Marc Mukasey said in an email. "There was no fraud. We are ready to fight this case in court."
Nikola was not charged. A statement said it worked with the government and is focusing on delivering Tre battery-electric trucks this year.
In the afternoon session, Nikola shares fell $ 1.43, or 10.1%, to $ 12.76 after falling as low as $ 12.60.
BEWARE OF SHORT SELLERS
The charges mean a steep decline for Milton, who founded Phoenix-based Nikola in 2014 and was its CEO until June 2020 when it went public after merging with a special purpose vehicle (SPAC).
Milton stepped down as Nikolas Executive Chairman last September, two weeks after short seller Hindenburg Research called the company a "fraud" and made many misleading statements about its technology.
Prosecutors said Milton's inappropriate statements included that Nikola had built an electric and hydrogen-powered "Badger" pickup from the ground up, developed batteries in-house that he knew would be bought elsewhere, and had early success the development of a "Nikola Ein" tractor-trailer that he knew would not work.
Strauss said the closest thing to driving the Nikola One was when the company's engineers rolled a prototype down a hill so it could be shot for a commercial.
The indictment states that Milton is also busy keeping Nikolas share price high.
It said that on March 2, 2020, the day before Nikola went public, Milton emailed a board member: “(We) need to make sure we get retail investors on our side. This prevents stocks from being shorted. That is very important to me. "
The SEC said Milton targeted ordinary investors whom he called "Robinhood (NASDAQ 🙂 investors" and presented himself as a "different" type of CEO who would speak openly about his groundbreaking company.
"Regardless of the US securities laws, executives cannot say what they want on social media," said Gurbir Grewal, chief of SEC enforcement, at the press conference.
Prosecutors said Milton's Nikola stake was worth at least $ 8.5 billion shortly after the badger announcements.
Although Nikola’s stock price has fallen more than 85% from its June 2020 peak, Milton is still worth $ 1.2 billion, Forbes magazine said Thursday.
Tesla (NASDAQ 🙂 Inc is one of Nikola's rivals in the electric truck sector.
The names of both companies come from Nikola Tesla, an inventor who was powered by electricity, among other things, and Tesla CEO Elon Musk, who is one of the richest people in the world today.
In 2018, Musk and Tesla each agreed to pay $ 20 million in fines to settle SEC charges over a Musk tweet.
Nikola initially denied Hindenburg's allegations, but in February a review by an outside law firm said it revealed statements by Milton and the company that were partially or completely false.
"We commend the regulators for acting expediently to protect investors and to hold Milton accountable for his outrageous lies," said Hindenburg founder Nathan Anderson in a statement.
Hindenburg released his report two days after General Motors Co (NYSE 🙂 agreed to supply batteries, chassis architecture, fuel cell systems, and a factory for the Badger pickup in exchange for an 11% Nikola stake and $ 700 million.
The companies revamped that relationship last November, removing the equity stake and plans to build the truck.
Stephen Girsky, a former GM vice chairman who ran the SPAC, which merged with Nikola, replaced Milton as Nikolas chairman.
SPACs are a faster way than IPOs to get private companies public.
However, critics say the process is prone to conflicts of interest and shoddy due diligence, and U.S. authorities have stepped up their scrutiny of SPACs.
Prosecutors and the SEC are also investigating the electric pickup maker Lordstown Motors Corp, which went public last October, over the terms of its SPAC and its vehicle pre-order statements.