Nikola Motor Company founder and former CEO Trevor Milton was charged Thursday with disseminating false and misleading information about the company's products and technological accomplishments, which caused the company's stock price and valuation to soar last year.
The charges, levied by the Securities and Exchange Commission (SEC), accuse Milton of "repeatedly disseminating false and misleading information – typically by speaking directly to investors through social media."
“We allege that Milton repeatedly made claims, mostly through social media, that either misstated or far exceeded what Nikola and its products actually did or could do,” said David Peavler, regional director of the SEC’s Fort Worth Regional Office. "Public company officials cannot say whatever they want on social media without regard for the federal securities laws. The same rules apply, and the SEC will hold those who make materially false and misleading statements accountable regardless of the communication channel they use.”
Milton founded Nikola in 2015 with the goal of manufacturing trucks that run on alternative fuels – namely hydrogen – with low or zero emissions, and building an alternative fuel station infrastructure to support those vehicles. Milton helped Nikola raise more than $1 billion in private offerings and go public through a business combination conducted by a special purpose acquisition company (SPAC).
Milton in September stepped down as executive chairman of his Phoenix, Arizona-based hydrogen-electric upstart amid a firestorm of criticism sparked by stock short-seller Hindenburg Research, which released a report calling Nikola an “intricate fraud built on dozens of lies over the course of its founder and executive chairman Trevor Milton,” and claimed to have evidence, including recorded phone calls, text messages, emails and more detailing alleged false statements by Milton.
According to the SEC’s complaint, Milton acted as Nikola’s primary spokesperson, appearing regularly on national media and communicating directly with investors through social media. Milton allegedly encouraged investors to follow him on social media to get “accurate information” about the company “faster than anywhere else," the SEC charges.
Milton stands accused of using his media platform "to repeatedly mislead investors about, among other things, Nikola’s technological advancements, products, in-house production capabilities, and commercial achievements." The complaint further alleges that Milton ultimately reaped tens of millions of dollars in personal benefits as a result of his misconduct.
“Having chosen to promote Nikola through social media, Milton was obligated under the securities laws to communicate completely, accurately and truthfully,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “That obligation exists for all public company officials, even those whose companies have only recently entered the public markets through SPAC transactions.”
The SEC’s complaint charges Milton with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks a permanent injunction, a conduct-based injunction, an officer and director bar, disgorgement with prejudgment interest and civil penalties.
Mark Russell has served as Nikola’s Chief Executive Officer since a few months before Milton's departure, and has largely worked to keep the company on track in Milton's absence. Earlier this month the company announced a second phase in establishing a nationwide plan for its Class 8 truck sales and service coverage with the addition of five independent dealers with more than 51 locations in Texas, Arizona, California, Colorado, New Mexico, Florida, Delaware, Virginia and Maryland. In April, Nikola announced a partnership with RIG360 Service Network, a network of heavy-duty truck service and maintenance centers, to provide sales and service products for commercial customers at more than 65 RIG360 dealer locations throughout the Southeast, Midwest and Northeast regions of the United States.
In a statement provided to CCJ Thursday, the Nikola Motor Co., noted that Milton "has not been involved in the company’s operations or communications since [September 20, 2020]. 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. We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company’s manufacturing facilities."