Federal prosecutors Thursday filed securities fraud charges against Trevor Milton, the former CEO of the electric vehicle startup Nikola, the most prominent case against an executive with a business that listed its shares on the stock exchange through a merger.
An indictment by the U.S. attorney’s office in Manhattan charged Milton with misleading investors — in particular retail investors — about the technology for battery and hydrogen powered vehicles it had hoped to manufacture.
Prosecutors said that for nearly a year, Milton used social media, television and podcasts to spread “false and misleading statements regarding Nikola’s product and technology.”
One such misleading statement, the charging document said, concerned the company’s Nikola One long-distance truck prototype. The prototype did not work, contrary to the glowing statements that Milton made about it.
Federal prosecutors and securities regulators started investigating Nikola last fall around the time an investment firm put out a report questioning its products and some of Milton’s claims. That firm, Hindenburg Research, said the company had put out a promotional video to suggest it had a working prototype — but never disclosed the truck was moving forward only because it was rolling down a hill in neutral gear. Milton resigned a few weeks later.
Nikola went public in June 2020 in a $700 million merger with a special purpose acquisition company, or SPAC, called VectorIQ. SPACs are blank-check companies that raise money from investors in the hopes of finding a company with an existing business to buy.
Federal prosecutors contend that retail investors were hurt by the stock’s sharp drop, which started last summer, but early investors in the company, including Milton, were not. Nikola’s shares were trading at about $14 Thursday morning, after falling from more than $65 in the middle of last year, a point at which the company had a valuation in excess of Ford Motor Co.’s.
Nikola said in a statement that Milton had not been involved with the company since resigning in September.
“Today’s government actions are against Mr. Milton individually, and not against the company. Nikola has cooperated with the government throughout the course of its inquiry,” the company said.
This article originally appeared in The New York Times.