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Prosecutors have accused Nikola founder Trevor Milton of securities fraud in an indictment in the Southern District of New York federal court, claiming the company falsified demonstrations and lied about “critical aspects of Nikola’s business” in order to increase stock price and drive interest in the company.
Over the past two years, the electric truck manufacturer (yes, we now have electric vehicles by both Nikola and Tesla) made waves by demonstrating a large electric truck, claiming it could pull cargo for a huge range of 900 miles (1,450 kilometers) and produce 645 continuous horsepower from just electric power alone. As expected, stock prices shot up and investment poured in as heads were turned towards the potential pioneers of the trucking world.
Now, prosecutors claim this was all smoke and mirrors, and instead the truck relied on a more mundane force to propel it – gravity.
More specifically, prosecutors claim that Nikola did not produce a working prototype in time for a product demo, and instead the vehicle was "towed to the top of an inclined stretch of road and then filmed rolling down the incline" and "powered through a cord running from an external power source, rather than the truck’s battery."
When shopping for a long-haul truck, cordless is generally preferred.
The indictment is not aimed at Nikola, but directly at Trevor Milton, who no longer has a role in the company. Milton’s legal team strenuously denies the allegations, stating in an email to Market Watch:
“Trevor Milton is innocent. He’s been wrongfully accused after a faulty and incomplete investigation. He will be exonerated after trial.”
Suspicions began after a report by Hindenburg Research in September 2020 accused Nikola of fraud, citing behind-the-scenes evidence and talks with an inside employee. It alleged that a video posted to social media, depicting a Nikola One truck in motion, was falsified, sped up, and edited to give the impression of self-propulsion – but actually depicted the truck rolling down the hill via gravity.
The report was damning. A deal with General Motors, in which the large motoring company would acquire equity of Nikola for a cool $2 billion, fell through and Nikola subsequently halted work on other developments.
Nikola responded, stating the report was “false and defamatory” to “negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself”.
At the court hearing on Thursday, prosecutors claimed Nikola built hype around the product under the illusion it was closer to finish than it actually was, while not actually proving the concept worked.
“A few weeks before the event, Nikola’s chief engineer informed Milton that the truck would not be functioning at the unveiling event unless the event was postponed,” prosecutors allege in the indictment.
“Milton made the decision to proceed as scheduled with the knowledge that the vehicle to be unveiled would not be functioning.”
Milton pled not guilty to the charges and was freed on bond. In the meantime, he is unable to speak to investors, but his legal team claims he will be fully exonerated by the court.
