Nikola founder Trevor Milton found guilty of fraud for misleading investors

Nikola Corp. founder Trevor Milton has been convicted of fraud for misleading investors in the electric truck company, a staggering fall for the door-to-door salesman turned billionaire who has vowed to revolutionize the auto industry.

Milton, 40, was found guilty on Friday of one count of securities fraud and two counts of wire fraud by a federal jury in Manhattan, as part of efforts by the US Department of Justice to crack down on corporate crime. He faces years in prison.

It’s been a wild ride for the charismatic entrepreneur, whose fortune has plummeted into the hundreds of millions since Nikola’s stock surged when the company listed its shares in June 2020. Milton, who remains the company’s largest individual shareholder company, founded Nikola in 2014 and grew it into a company valued at $34 billion when it went public, more than Ford Motor Co. at one point.

The meteoric rise of the startup, which had no revenue at the time, came amid a wave of electric vehicle companies going public through Special Purpose Acquisition Companies, or SPACs. , starting two years ago as investors scoured the landscape for the next Tesla. The SPAC route allowed them to market their businesses based on future performance projections rather than actual financial results. Some of the biggest names on Wall Street have invested money in the sector.

Celebrity endorsements

After Nikola’s listing, mainstream investors also began noticing Milton’s vision, with the company being widely discussed online, much like Elon Musk’s. While Nikola initially focused on heavy-duty commercial trucks, it expanded into sport and consumer electric vehicles. All of this was supercharged by celebrities like Heavy D of the Diesel Brothers, who promoted the Badger pickup, a product that never made it past the rendering stage.

Prosecutors argued that Milton enticed retail investors to buy Nikola shares by misrepresenting the company’s products and capabilities in numerous podcast and television interviews, grossly exaggerating Nikola’s ability. Nikola to manufacture hydrogen fuel cell trucks as well as its ability to produce the fuel. himself.

It was “lie after lie after lie,” Assistant U.S. Attorney Jordan Estes told the jury in closing arguments Thursday. “His lies may have been spread on social media, but make no mistake: this was an old-fashioned fraud.”

Milton’s lawyers called the case a ‘distortion suit’, saying their client never intended to mislead potential investors and that, in any event, his statements were not material or material enough to influence decisions of these investors.

Milton was generally upbeat as he arrived in court in a suit and tie to sit down with his lawyers. At times, there were dozens of people in the courtroom, with her family and friends filling the first two rows behind the defense table.

In his own conclusion, which brought Milton’s wife to tears, defense attorney Marc Mukasey asked jurors “to imagine what a nightmare it is for 40-year-old Trevor to have his life on the line. “because of an overzealous pursuit.

There were also lighter moments. During the tense vigil during jury deliberations on Friday, Mukasey did some golf practice with a ghost club.

During the trial, which began with opening statements on September 13, the government called a dozen witnesses. It all started with Paul Lackey, a former Nikola contractor whose fraud allegations helped fuel the criminal investigation.

Lackey, an engineer with electric drive systems company EVDrive, said he gave information to Nate Anderson’s Hindenburg Research in exchange for a share of his profits from shorting the company. The September 2020 short seller report called Nikola a “complex fraud” which, among other allegations, overestimated the capabilities of its early test trucks. Shares of Nikola fell.

The government has called other Nikola insiders to the witness stand. Among them:

  • Brendan Babiarz, a former Nikola designer, said a prototype of the Badger pickup truck planned by the electric vehicle startup was partly made up of components from a Ford F-150 Raptor.
  • CEO Mark Russell, who said he only learned after joining the company that his first electric truck had no natural gas turbine or fuel cell when Milton unveiled it
  • Chief Financial Officer Kim Brady, who said Milton was so “hyper-focused” on the company’s stock price that when shares fell $5 on the first day of trading, he thought something was wrong. didn’t go with the Nasdaq

The defense called Harvard Law School professor Allen Ferrell, an economics and stock market expert, who told the jury that traders had mostly ignored statements made by Milton between the time his company went public and when he resigned.

The case is US v. Milton, 21-cr-478, US District Court, Southern District of New York (Manhattan).

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