Trevor Milton charged with fraud: who is he and what happened
- The U.S. attorney's office charged Trevor Milton with three counts of fraud.
- A brief recap of the events that made Milton resign as Chairman of Nikola Corp.
- Shares of the American company were about 8% down on Thursday morning.
Almost a year after Trevor Milton resigned as Chairman of Nikola Corp (NASDAQ: NKLA), the U.S. attorney’s office on Thursday charged him with three counts of fraud. Following an investigation into the electric vehicle start-up, federal prosecutors accused Milton of exaggerating and misrepresenting “nearly all aspects of the business.”
According to CNBC, prosecutors said in a nearly 50-page legal document:
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
Milton’s scheme targeted individual, non-professional investors — so-called retail investors — by making false and misleading statements directly to the investing public through social media, and television, print and podcast interviews,” prosecutors said in the 49-page indictment.
Who is Trevor Milton?
Trevor Milton is a billionaire entrepreneur most famous for founding the electric car-maker Nikola in 2015. Nikola focused its efforts on creating the next generation of semi trucks that are powered by both hydrogen and batteries. Within two years, Milton said the company “engineered the holy grail of the trucking industry” as its zero-emission trucks can haul 80,000 pounds for more than 1,000 miles “without stopping.”
Over the years these types of exciting and bold statements caught the attention of investors. Milton maintained a degree of hype and the company went public on June 4, 2020, as part of a SPAC deal.
Why Trevor Milton resigned from Nikola
Short-seller Hindenburg Research released a scathing report on Nikola that focused both on the company’s operations and the leadership team. Hindenburg stated in its opening sentence:
Today, we reveal why we believe Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career.
Hindenburg’s report includes various forms of documentation that explains how and why Nikola and Milton were engaged in “intricate fraud built on dozens of lies.” In fact, the word ‘fraud’ was included 646 times in teh report.
Nikola became a target for a federal probe after Hindenburg Research said that the company made misleading claims about its products. While Milton denied the allegations, Nikola later acknowledged at least nine comments Milton made from mid-2016 through mid-2020 were “inaccurate in whole or in part, when made.”
One example of where Hindenburg believes it discovered wrongdoing was a Nikola video titled “Nikola One in Motion.” The research firm uncovered evidence to believe the company towed a non-functioning truck up a hill and filmed it rolling down to give the impression it was fully functional.
Ten days following the release of Hindenburg’s report, Nikola announced Milton voluntarily stepped down from his post as both executive chairman and board member. The executive said at the time his decision to step down is based on his desire for Nikola to continue operating with a major distraction. He said at the time:
Nikola is truly in my blood and always will be, and the focus should be on the Company and its world-changing mission, not me. So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman. Founding Nikola and growing it into a company that will change transportation for the better and help protect our world’s climate has been an incredible honor.
Nikola stock reaction
Shares of Nikola were trading lower by around 8% Thursday morning following reports of Milton being charged with fraud. Nikola told CNBC in a statement it is cooperating with the government “throughout the course of its inquiry. The company further noted allegations are against Milton as an individual and do not relate to Nikola’s business.
Milton surrendered to authorities and will appear in a New York court late on Thursday.