Nikola Founder Trevor Milton Sentenced to 4 Years in Prison for Fraud

NEW YORK (DOJ) – Trevor Milton was sentenced to four years in prison for engaging in securities and wire fraud in connection with his scheme to defraud and mislead investors about the development of products and technology by the company he founded, Nikola Corporation (“Nikola”). Milton was previously convicted after a one-month trial before Judge Ramos.

U.S. Attorney Damian Williams said: “Trevor Milton lied to investors again and again — on social media, on television, on podcasts, and in print. But today’s sentence should be a warning to start-up founders and corporate executives everywhere — ‘fake it till you make it’ is not an excuse for fraud, and if you mislead your investors, you will pay a stiff price.”

According to the Indictment, statements made in public court proceedings and filings, and the evidence at trial:

From at least in or about November 2019 up through and including at least in or about September 2020, Milton engaged in a scheme to defraud investors by inducing them to purchase shares of Nikola Corporation, the electric- and hydrogen-powered vehicle and energy company that Milton founded, through false and misleading statements regarding Nikola’s product and technology development. 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.

Milton made these false and misleading statements regarding Nikola’s products and capabilities to induce retail investors to purchase Nikola stock. Milton took advantage of the fact that Nikola went public by merging with a Special Purpose Acquisition Company or “SPAC,” rather than through a traditional IPO, by making many of his false and misleading claims during a period where he would have not been allowed to make public statements under rules that govern IPOs.

Milton made false claims regarding nearly all aspects of Nikola’s business, including: (i) false and misleading statements that the company had early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One,” when Milton knew the prototype was inoperable; (ii) false and misleading statements that Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” from the “ground up” using Nikola’s parts and technology, when Milton knew that was not true; (iii) false and misleading statements that Nikola was producing hydrogen and was doing so at a reduced cost, when Milton knew that in fact no hydrogen was being produced at all by Nikola, at any cost; and (iv) false and misleading claims that reservations made for the future delivery of Nikola’s semi-trucks were binding orders representing billions in revenue, when the vast majority of those orders could be cancelled at any time.

For example, when Nikola’s stock was publicly traded in 2020, Milton claimed that Nikola had defied expectations as a young, disruptive company when it managed to build its prototype hydrogen-powered semi-truck, the Nikola One, which Nikola unveiled on or about December 1, 2016, at a large event that was filmed and broadcast on the internet. During that event and later, Milton claimed that the prototype Nikola One “fully functions and works, which is really incredible.” In fact, the Nikola One prototype was never completed and never functioned. Rather, the prototype was wholly missing significant parts, including gears and motors, and the control system (i.e., the system that communicates the driver’s directions to the vehicle) and other significant systems were missing or incomplete. Later, in or about January 2018, and despite the fact that the Nikola One prototype was never completed or operational, Milton published on Twitter and also published on his own Twitter account a video in which the Nikola One appeared to be driving on its own power down a road with no incline. In fact, to film these clips, the Nikola One was towed to the top of a hill, at which point the “driver” released the brakes, and the truck rolled down the hill until being brought to a stop in front of the stop sign.

Also in 2020, at the same time he was spreading misinformation to investors generally to increase Nikola stock price, Milton also made false and misleading statements about Nikola’s business and technology to a particular individual as part of an effort to use Nikola stock to make purchases, even when Milton was subject to a lockup and so could not yet sell his stock. Specifically, Milton made misrepresentations about Nikola’s business to an individual in order to induce that individual to accept options to purchase Nikola stock (the value of which had already been inflated by Milton’s scheme to defraud retail investors) in lieu of cash for the purchase of a substantial ranch in Utah.

In addition to the prison sentence, Milton, 41, of Alpine, Wyoming, was sentenced to three years of supervised release, ordered to forfeit a property in Utah, and ordered to pay a fine of $1 million. Judge Ramos will set restitution in a future proceeding.

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