Nikola’s electric truck prototypes were powered by hidden electrical outlets, dragged into place and rolled down hills, prosecutors say

The founder of the much-hyped electric truck manufacturer Nikola Corp. NKLA,
has been accused of lying to investors about the alleged technological breakthroughs the company had made to drive its share price, federal prosecutors announced Thursday.

Trevor Milton, 39, is accused of claiming that his company successfully produced working prototypes of electric trucks and pickup trucks that would rock the industry when in fact he never built anything.

“Ultimately, this is a very simple case: Milton told lies to generate public demand for his stock,” said Audrey Strauss, the US Attorney for the Southern District of New York.

At public events, the prototype vehicles were towed into place and powered by plugs coming from hidden outlets.

Milton resigned from Nikola in September after it emerged that the Justice Department had opened an investigation into the startup and its founder over possible false claims. Milton has previously tweeted that he planned to defend himself against “false allegations”.

Prosecutors said Milton was arrested in Manhattan on Thursday. He was not immediately available for comment. In a statement, Nikola said the charges were against Milton and not the company, noting that he had not been involved with the company since last year.

“Nikola has worked with the government throughout the investigation. We remain committed to our previously announced milestones and timelines and focus on delivering Nikola Tre battery-electric trucks from the company’s manufacturing facilities later this year,” the statement said.

In the indictment, federal prosecutors said Milton had spent years inflating the technological advancements the company had achieved, alleging it built working prototypes of its Nikola One truck and Badger pickup truck from parts the company had manufactured entirely itself. .

To make it look like the prototype truck was driving, it was dragged to the top of a hill and then rolled to the bottom, prosecutors said.

Prosecutors said the prototypes unveiled were in fact defective and were Frankenstein monsters cobbled together from parts from other vehicles. At public events, the vehicles were towed into place and powered by plugs from hidden outlets.

In one case, where the vehicle was filmed for a promotional film, tape was used to prevent the doors of a prototype truck from opening, prosecutors said. To make it appear that the truck was driving, it was dragged to the top of a hill and then rolled down, according to the indictment.

Milton is said to have repeatedly said publicly that the prototypes were fully operational and overestimated the number of pre-orders the company had received.

Non-traditional IPO

In June 2020, the company went public through a blank check company, or SPAC, called VectoIQ Acquisiton. Prosecutors said that because the company did not go public through a traditional IPO, Milton was not bound by the traditional “quiet period” post-listing statements, and was able to make bizarre public social media claims about its success. of the company to drive the share price up by attracting private investors.

“Among the private investors who eventually invested in Nikola were investors who had no previous experience in the stock market and who had started trading during the COVID-19 pandemic to replace or supplement lost income or to spend their time while they were in lockdown,” the indictment read. .

Prosecutors said that in the initial period after Nikola began trading publicly, the value of Milton’s stock rose by $7 billion. After the company was revealed to be under investigation, its shares collapsed, causing many private investors to lose tens and even hundreds of thousands of dollars, prosecutors said. In some cases, some investors lost significant portions of their retirement savings, they said.

The Securities and Exchange Commission has filed a parallel civil complaint. “After choosing to promote Nikola through social media, Milton was required by securities laws to communicate fully, accurately and truthfully,” said Gurbir Grewal, SEC director of enforcement. said in a statement Thursday. “That obligation exists for all public company officials, even those whose companies have only recently entered public markets through SPAC transactions.”