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Nikola founder Trevor Milton stands trial on fraud fees

CEO and founding father of US Nikola, Trevor Milton speaks throughout presentation of its new full-electric and hydrogen fuel-cell battery vans in partnership with CNH Industrial, at an occasion in Turin, Italy December 2, 2019.

Massimo Pinca | Reuters

The founder of electrical semitruck maker Nikola Motor is standing trial on fraud fees associated to statements he made in regards to the firm’s expertise and merchandise, statements that federal prosecutors allege have been exaggerated and deceptive.

The US Legal professional’s Workplace in Manhattan has alleged that Trevor Milton, who based Nikola in 2014, lied about “practically all facets of the enterprise” throughout his time as chairman and CEO of the corporate. These lies have been meant to bolster gross sales of the startup’s inventory, prosecutors alleged in indictments launched in 2021 and earlier this 12 months. Milton has denied the fees.

“He lied to dupe harmless traders into shopping for his firm’s inventory,” Assistant US Legal professional Nicolas Roos stated in opening statements in US District Court docket in New York Tuesday. “On the backs of these harmless traders taken in by his lies from him, he turned a billionaire nearly in a single day.”

The trial started with jury choice on Monday and obtained underway on Tuesday. Prosecutors advised potential jurors that the proceedings have been prone to final about 5 weeks.

The trial caps a shocking rise and fall of Nikola underneath Milton.

The corporate’s inventory worth briefly emerged to greater than $90 per share in June 2020, days after it went public by way of a merger with a special-purpose acquisition firm (SPAC). The inventory run-up made Nikola – an organization that did not but have income on the time – extra beneficial than Ford Motor.

However its shares fell sharply after Milton was compelled out of the corporate in September of that 12 months, following fraud allegations made by short-seller Hindenburg Analysis. Each the Securities and Change Fee and the US Division of Justice opened investigations following Milton’s departure from him; he was indicted on three counts of fraud by a grand jury in July 2021. Prosecutors added a fourth depend in June.

Nikola’s shares closed at $5.03 apiece on Tuesday.

Milton is going through two counts of securities fraud and two counts of wire fraud, all associated to statements he made about Nikola’s enterprise whereas he was chairman and CEO of the corporate. If convicted, he may resist 25 years in federal jail.

Milton’s lawyer, Marc Mukasey, stated Tuesday that Milton sought to convey a imaginative and prescient for the way forward for trucking, to not mislead traders. Mukasey has indicated that the protection plans to argue different executives at Nikola, together with the corporate’s normal counsel, signed off on Milton’s statements.

Nikola itself is not going through fees on this case. The SEC introduced associated civil fees towards the corporate final 12 months, however that case was settled in December after Nikola agreed to pay a $125 million high-quality. Milton nonetheless owns Nikola inventory, however the firm has in any other case reduce ties with its founder.

Here is what Milton is charged with:

Prosecutors allege that Milton made “false and deceptive statements concerning Nikola’s product and expertise growth” as a part of a “scheme” meant to induce retail traders to purchase shares of Nikola. Prosecutors allege:

  • Milton stated that the corporate’s first semitruck prototype, referred to as the Nikola One, was “totally useful” – nevertheless it wasn’t.
  • A video displaying the prototype truck apparently driving underneath its personal energy was created by rolling the truck — which could not drive by itself — down a hill.
  • Individually, Milton claimed that Nikola had engineered and constructed an electrical pickup truck referred to as the Badger, totally on his personal, after years of labor. However, prosecutors say, the Badger was little greater than “idea sketches and renderings” on the time of Milton’s preliminary statements.
  • Whereas the corporate finally confirmed a prototype Badger, the present truck was actually constructed by third-party distributors and based mostly on a truck from a big automaker.
  • Milton additionally advised traders that Nikola was producing hydrogen gasoline — wanted to refuel its fuel-cell-powered vans — at a diminished price; that Nikola had developed electric-vehicle batteries in-house; and that Nikola had binding orders representing “billions in income” for his electrical vans. All of these statements have been false, in line with prosecutors.

Milton can also be accused of constructing related misrepresentations to the vendor of a ranch he bought in 2020, in an try and get the vendor to simply accept Nikola inventory as half fee for the acquisition.

Prosecutors are anticipated to start presenting their full case towards Milton to jurors on Wednesday.

—Reuters contributed to this report.


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