Trevor Milton’s brief moment in the sun as a self-made billionaire at the forefront of the electric vehicle industry may be coming to an inglorious end. On Thursday, federal prosecutors in Manhattan charged the 39-year-old Nikola founder with securities and wire fraud, and accused him of promoting “a false and exaggerated narrative” about the company through social media, on television, in print publications and on podcasts.
Along with prison time, the government is seeking forfeiture of all property “traceable to the commission of said offenses,” which likely means all of the more than $1 billion Milton amassed by taking Nikola public through a SPAC merger last June. The U.S. Securities and Exchange Commission also filed a related civil suit against Milton, as is customary in these situations.
A year ago, the company was considered one of the more promising startups in an increasingly crowded field of electric vehicle-makers trying to emulate the success of Elon Musk’s Tesla. It wasn’t just the name, Nikola, that made Milton’s company seem like a safe bet. The company had a strong relationship with General Motors, which took an 11 percent stake in the startup and reached a deal to share battery and fuel-cell technology.
Phoenix-based Nikola appeared to have an innovative means of powering long-haul trucks while producing zero emissions using hydrogen fuel cells. Hydrogen fuel cells offer potential advantages over lithium ion batteries, used in most electric vehicles, because the energy to weight ratio is much greater, providing a greater driving range for the same size of battery. Making hydrogen fuel cells, however, is generally a cost-prohibitive process.
But the seams were already starting to unravel as the stock started trading publicly. In June 2020, Bloomberg published a story describing how a prototype of the Nikola One freight truck, which was unveiled at an event in 2016, was not drivable — even though Milton touted its capabilities as if it were functioning. He has denied the claims made in the article.
Meanwhile, in September 2020, short-seller Hindenburg Research published a scathing report calling the company “an intricate fraud built on dozens of lies over the course of” Milton’s career. According to Hindenburg, those lies included providing misleading descriptions of orders for trucks, disseminating a video of a Nikola One truck rolling down a hill to give a false impression that it was traveling under its own power, and claiming that Nikola had dramatically slashed the price of hydrogen fuel-cells (it had not).
(We recognize that a short-seller named “Hindenburg” blowing up a company having to do with hydrogen is sort of an odd coincidence.)
The Feds repeated many of the same points that Hindenburg cited, including claims involving Nikola One. Prosecutors also alleged Milton made misleading claims about the Badger, an electric pickup truck the company was working on. Milton supposedly repeatedly stated that Nikola was working on the truck “from the ground up,” but instead the company used Ford F-150s as a basis for the prototypes.
“This defendant allegedly concealed the progress and success of Nikola’s technology, when he lied to investors and lured them into believing that they had invested at the ground floor of a company that had already developed viable Nikola One and Badger prototypes that were ready to be produced,” said Philip Bartlett, a federal postal inspector who worked on the case.
Milton stepped down as executive chairman of Nikola in September 2020, tweeting at the time that he intended to defend himself against “false accusations” by critics. Nikola’s stock price has plummeted more than 80 percent from its peak back in June 2020 of nearly $66 per share. Still, the founder’s net worth currently sits at $1.2 billion, consisting largely of Nikola stock, according to Forbes.
Before launching Nikola in 2015, Milton had dropped out of Utah Valley State College, had a stint running a security and alarm company, and founded an alternative energy vehicle business called dHybrid, which was eventually sold.
After surrendering himself to authorities in New York, Milton entered a not guilty plea in court on Thursday and was allowed to remain free on a $100 million bond, pending trial. His lawyers have called the case the result of a “faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses.”