The US Attorney’s Office in Manhattan has accused Milton, who resigned Nikola’s presidency last year, of defrauding investors by using “false and misleading statements” to convince them to buy shares in the company .
Milton was taken into custody Thursday morning in New York. He pleaded not guilty and was released on $ 100 million bail.
“It’s a very simple case,” said Audrey Strauss, US lawyer for the Southern District of New York. “Milton told lies to generate demand for Nikola’s shares. “
He was charged with two counts of securities fraud and one count of wire fraud in an unsealed indictment Thursday. The Securities and Exchange Commission also filed a civil lawsuit against Milton.
According to the indictment, federal prosecutors allege that Milton targeted “thousands” of retail investors by speaking to them directly via social media, television, print media and podcasts. He said many of those investors had no prior experience in trading and were buying shares to supplement income lost from the pandemic or to pass the time during the lockdown.
“The value of Nikola’s shares, including shares held by retail investors, has plummeted after some of Milton’s statements were found to be false and misleading,” the indictment reads. As a result, some investors suffered thousands of dollars in losses, “including, in some cases, the loss of their retirement savings or the funds they had borrowed to invest in Nikola,” the indictment says. .
Milton’s lawyers called the case a “new low point in the government’s efforts to criminalize lawful business conduct.”
“From the start, it’s been a crime-seeking investigation. Justice has not been served by the government’s action today, but it will be when Mr. Milton is exonerated, ”they said in a statement.
Prosecutors listed several allegedly false and misleading statements by Milton, including allegations that the Nikola One truck was a working prototype despite the lack of propulsion; that Nikola had developed batteries and other components when he bought them from suppliers; and that truck reservations were burdensome orders worth billions in revenue, when most could be easily canceled.
The indictment also included details of a video seized by critics of the company, which shows the Nikola One rolling down a hill because it cannot move on its own. The truck door was made up of minivan parts and “had to be taped during filming to keep it from falling,” according to the indictment.
The vehicle’s turbine, designed to run on natural gas, and batteries were removed prior to commercial filming to mitigate the risk of fire, according to the indictment.
Milton aspired to be among Forbes’ 100 richest people, according to the US indictment, and was motivated “to get rich and to elevate his entrepreneurial stature.” The value of its shares rose from $ 844 million when the company went public to $ 8.5 billion during Nikola’s heyday.
According to the indictment, Milton was very focused on the company’s share price and the flow of users buying the shares on the Robinhood trading app. When a senior executive pointed out the hype among retail investors, Milton reportedly replied, “This is how you build a foundation. Like. ”
Nikola said Milton resigned on September 20 “and has not been involved in the company’s operations or communications since that time. Government actions today are directed against Mr. Milton individually, not against the company. Nikola cooperated with the government throughout its investigation.
The company said it still plans to deliver Nikola Tre battery-powered electric trucks later this year.
Nikola’s shares fell more than 15% on Thursday. It went public in June last year through a merger with VectoIQ Acquisition, a blank check company created by former General Motors executive Stephen Girsky.
Its stock price climbed to $ 80 after its public debut before collapsing on the publication of a Hindenburg Research shortseller report, which claimed the company was a “complex fraud.” An internal investigation by the company found that nine of Milton’s statements were wholly or partially inaccurate.
The accusations against Milton come as regulators increasingly fear that retail traders do not understand the risks of investing in special purpose acquisition companies. The SEC recently issued a number of statements warning investors of the outsized benefits that insiders derive from trades and has started to scrutinize trades.
While Strauss declined to comment on other Spacs, “we have identified something about the structure of Spac that has allowed it to do some of the things that we allege are criminal,” she said.
Gurbir Grewal, head of the SEC’s enforcement division, said the case “also demonstrates that business executives cannot say what they want on social media in defiance of the law on social media. securities ”.