Nikola founder Trevor Milton accused of misleading investors at fraud trial

Trevor Milton, the founder of Nikola, masterminded a scheme to cheat investors by driving up his electric vehicle company’s shares, prosecutors alleged at the start of his trial on criminal fraud charges.

Nikola’s former chief executive sat in a grey suit during opening arguments in Manhattan on Tuesday, as assistant United States attorney Nicolas Roos told jurors that he had lied to “innocent investors” and become a billionaire overnight by doing so.

“This is Trevor Milton and he committed fraud,” Roos told jurors.

The battery-powered truck company had been a darling of investors, with a valuation of $30bn that briefly surpassed that of Ford Motors. But its stock price began to plummet in September 2020 after Hindenburg Research, a short selling group, issued a report claiming Nikola was an “intricate fraud”.

Today Nikola’s market capitalisation is $2.3bn, down more than 90 per cent from its 2020 high.

Milton, who resigned as executive chair and chief of the Arizona manufacturer two years ago, is charged with four counts of fraud. He is accused of misleading investors as he touted Nikola on Twitter and in interviews, driving the value of his own shares from $844mn when the New York-listed company went public to $8.5bn at their peak. Milton has pleaded not guilty.

With one of the fraud charges, prosecutors alleged Milton misrepresented the value of Nikola’s shares when he used it to help purchase a ranch in Utah. The property was one of two he later used to post a $100mn bond in court.

“Trevor Milton was committing securities fraud and wire fraud to pump his company’s stock so he could get rich,” Roos said.

The prosecutor set the tone for how prosecutors will try the case, repeatedly accusing Milton of lying about his company’s capabilities and purposefully promulgating the lies on platforms where he knew ordinary investors were listening.

Roos said Milton had made multiple “false and misleading statements”. He said customers had placed binding orders worth billions in revenue, rather than reversible reservations, and that Nikola had developed batteries and other components when actually it was buying them from suppliers.

Jurors were also told about a now-notorious marketing video for an early Nikola prototype that appeared to be driving forward but in fact lacked a propulsion system and was rolling downhill. Milton’s defence team had attempted to block its screening, saying the video was filmed in 2017 before the events in the indictment, but Judge Edgardo Ramos overruled their objection.

Nikola agreed in December to pay a $125mn penalty to settle a civil fraud case brought by the US Securities and Exchange Commission. The company neither admitted nor denied wrongdoing.

Marc Mukasey, an attorney for Milton, delivered a searing response to the government’s opening statement. He called the lawsuit “prosecution by distortion” as a definition of the word was projected to the room.

Mukasey said his client is an ordinary man whose father had worked as a railroad engineer, not a “corporate guy”. He highlighted that Milton had hired “the best and the brightest” to work at Nikola as well as “great accountants” EY, all of whom shared his belief and faith in the company.

Without naming Hindenburg Research, Mukasey said the company had been attacked by a report that was intended to “short and distort” and called it a “hit job”.

That basis of the defence’s argument appeared to be that all material information about the company was publicly available to investors on the SEC’s website and Nikola’s own page. Milton had simply shared his excitement about the company with investors because he was “flat-out stoked” about it, said Mukasey.

“His relationship to the stock price was like a parent’s relationship to its kid,” Mukasey said — he wanted it to do well.