SEC Charges Founder of Zero Emission Truck Startup With Fraud

According to a complaint filed on Thursday in the Southern District of New York, Trevor R. Milton, the founder, largest shareholder, and former CEO and Executive Chairman of Nikola Corporation engaged in fraud to deceive investors about the vitality of his company and the success of its products. 

The Securities and Exchange Commission (SEC) filed the complaint after members of its Fort Worth Regional Office conducted an investigation with help from the United States Attorney’s Office and the U.S. Postal Inspection Service, according to a news release.

The court filing explained that Nikola, founded in 2015, sought to manufacture trucks powered by alternative fuels with low or zero emissions. The company also aimed to build “an alternative fuel station infrastructure to support those vehicles.”

Milton transgressed securities laws, the SEC said, primarily by using his social media presence and frequent television and podcast appearances to spread false and misleading information about Nikola for personal gain. From about 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,” the complaint said.

In particular, Milton lied about the company’s products, technical advancements, and commercial prospects to lure retail investor support, the SEC alleged. For example, the complaint said, Milton falsely asserted that Nikola’s first prototype could be driven under its own power using a video to falsely depict that the vehicle was indeed doing so. In addition, Milton purportedly claimed that Nikola was producing hydrogen, doing so at a cost four times less than competitors, and that it sourced electricity at costs that made hydrogen production profitable.

The complaint charged Milton with violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. It sought equitable relief, including a conduct-based injunction, an officer and director bar, disgorgement with prejudgment interest, and civil penalties.