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Former Nikola CEO Milton Charged With Three Counts Of Fraud, Pleads Not Guilty And Posts $100 Million Bail

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by Tyler Durden
Thursday, Jul 29, 2021 - 05:09 PM

Update 7/29/21 1709 EST: "Milton was taken into custody in the morning, then appeared in front of Magistrate Judge Sarah Netburn in the Southern District of New York on Thursday afternoon. He pled not guilty to all three charges and was freed on a $100 million bond," according to FreightWaves

The report noted that bail was secured by two properties in Utah owned by Milton, "one worth $36 million, the other worth $4 million."

U.S. Attorney Audrey Strauss commandeered a press conference today at 11AM that lasted about 20 minutes wherein she said: “Today’s criminal charges against Milton are where the rubber meets the road.”

Philip Bartlett, inspector-in-charge at the U.S. Postal Inspection Service said at the conference: “In this case, a fraud was committed with the defendant allegedly misleading the progress and viability of certain hydrogen and battery-powered trucks. … He lied to investors and lured them into believing the company had already developed viable prototypes that were ready to be produced. Thousands of investors relied on this false information to purchase company stock. During the days following Milton’s resignation from Nikola, the company lost approximately 40% of its value and individual investors were cheated out of hundreds of thousands of dollars.”

“This case is about the obligation of corporate officers like Milton to provide complete truthful and accurate information at all times while discussing their company’s affairs. There is no end-around or exception to this obligation. This case also demonstrated that corporate officers cannot say whatever they want on social media without regard for the federal securities laws,” added Gurbir Grewal, the SEC’s director of the Division of Enforcement.

Milton looks as though he is going to be fighting the charges face-first, according to a statement put out by his lawyer, who commented: “Trevor Milton is innocent; this is a new low in the government’s efforts to criminalize lawful business conduct. Every executive in America should be horrified.”

Meanwhile, as Milton's lawyers stood by their extremely rich client, Nikola the company distanced itself from Milton, stating today: “Trevor Milton resigned from Nikola on September 20, 2020, and has not been involved in the company’s operations or communications since that time. 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.”

Milton's lawyers continued: “Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry. Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses. From the beginning, this has been an investigation in search of a crime. Justice was not served by the government’s action today, but it will be when Mr. Milton is exonerated.”

CNBC provided this sketch of Milton at today's indictment. 

***

It looks as though former Nikola CEO Trevor Milton has rolled down the hill face first into reality this morning.

That's because multiple sources are reporting that the U.S. Attorney's Office in Manhattan is charging Milton "in connection with their investigation into allegations of fraud and for making false and misleading statements to investors," according to Tom Winter of NBC.

CNBC has reported that Milton has been charged with "three counts of fraud" and making false claims regarding “nearly all aspects of the business".

"Prosecutors say that when Milton unveiled their tractor trailer truck it had to be plugged into the wall, the headlamps were activated by remote by a staffer, and air had to be pumped in because there was a slow leak in the air lines of the truck," Winter continued.

"And yes, prosecutors do say part of Milton's conduct was video of the Nikola truck in the Super Bowl ad was not in fact of a working truck but was towed to the top of a hill. Breaks were released and it rolled downhill."

An SEC complaint filed this morning also revealed that footage of the truck "had been sped up two-to-three times" and that the video was "ultimately approved" by Milton.

"Federal charges will be filed today," Phil LeBeau said on CNBC this morning. "All of this started initially with Hindenburg Research saying 'Hey look, a lot of the comments and claims that were made by Trevor Milton and Nikola regarding the ability of their semis to power themselves, videos that were shot, that they're not accurate'. Ultimately, Trevor Milton was bounced out of the job at Nikola."

The SEC also filed a complaint on Thursday morning, alleging Milton "engaged in a fraudulent scheme to deceive retail investors about Nikola’s products, technical advancements, and commercial prospects for his own personal benefit in violation of the federal securities laws." The complaint alleges that "Milton did so primarily by leveraging his social media presence and frequent appearances on television and podcasts to flood the market with false and misleading information about Nikola."

The complaint says Milton "repeatedly made false and misleading statements about core aspects of Nikola’s products, technological advancements, and commercial prospects" including

  • (a) Falsely claiming that Nikola’s first semi-truck prototype, the Nikola One, could be driven under its own power, and using a misleading video to create the false impression that the Nikola One was, in fact, driving under its own power
  • (b) Falsely claiming that Nikola was producing hydrogen, that it was doing so at a cost that was four times less than the prevailing market rates, and that it had obtained electricity at costs that made hydrogen production profitable
  • (c) Falsely claiming that Nikola had significantly developed or already completed a prototype of an electric pickup truck, the Badger, and that this vehicle used primarily Nikola’s proprietary components
  • (d) Falsely claiming that Nikola had obtained “billions and billions and billions and billions” of dollars of committed truck orders
  • (e) Falsely claiming that Nikola had developed a “game-changing” battery technology and that Nikola was manufacturing and developing multiple key vehicle components “in-house”; and
  • (f) Falsely claiming that the total cost of ownership of Nikola’s trucks was 20-30 percent below that of diesel vehicles.

The complaint also says that Milton would regularly take action to try and stop declines in Nikola's share price <cough> Elon <cough>. It reads: 

"On days when Nikola’s stock price declined, Milton regularly attempted to direct Nikola’s senior executives to take actions to stop the price decline. Senior executives received frantic phone calls or text messages from Milton on such days in which he urged the executives to “do something.” Milton also spoke of needing to put out “good news” or some kind of announcement “to get people excited” as a way to counteract price declines or maintain support for the stock price."

The complaint also says that "Milton tracked the daily number of new Robinhood users who held Nikola stock" and apparently was excited that retail bagholders stockholders were buying the stock:

The senior executive responded, in part, by expressing his amazement at how many calls he received “from retail investors today that have no clue about Nikola, other than their friends told them to buy. A lot of hype out there with retail investors,” to which Milton replied: “That’s how you build a foundation. Love it.”

Milton also misled the public about the company's Badger pickup truck, the SEC alleged, claiming the pickup was only a "CGI rendering" and nothing more:

You can read the full complaint here:

Milton is still the largest holder of Nikola stock and owns about 20% of the company. 

Hindenburg Research, who was the first to allege that Milton was making false statements in a scathing report last fall, said: "We commend regulators for acting expediently to protect investors and hold Milton accountable for his egregious lies."

Recall, among the bolder accusations made by Hindenburg Research in their scathing report about Nikola Corporation in September was the allegation that Nikola faked its Nikola One semi truck "in motion" video, which appeared to show a functioning big rig barreling through the desert, trailer in tow. Nikola later admitted that the video was simply a truck rolling down a hill.

Recall, in November 2020, we also wrote about allegations that Nikola used customer deposits for working capital purposes. 

Charges are set to be officially announced at 11AM.

NKLA shares are down over 7% in the pre-market, back to their lowest since May...

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