In a significant legal development, Trevor Milton, the founder of Nikola Corp, has been handed a four-year prison sentence for deceiving shareholders about the electric-truck company’s advancements. The verdict, delivered on Monday by US District Judge Edgardo Ramos in Manhattan, comes more than a year after a jury found Milton guilty of securities fraud and wire fraud. The conviction stems from Milton’s deliberate misrepresentation of critical details about Nikola’s product and technology development.
Prosecutors had sought a severe penalty, aligning with the 11-year term recommended by probation officials. Their argument emphasized the need for a substantial incarceration period to serve as both punishment for Milton and a deterrent for other corporate leaders engaged in similar deceptive practices.
Milton, the founder of Nikola Corp, visibly emotional, pleaded with the judge for probation, asserting that his actions were not intentional and were a result of his limited experience as a CEO. He admitted to lacking the seasoning required for such a role, stating, “I was not a very seasoned CEO.”
The swift jury decision in October 2022, following a concise two-month trial featuring over a dozen government witnesses and compelling evidence, included a viral video that purportedly showcased a Nikola semi prototype in motion under its own power. However, it was later revealed that the truck was rolling downhill due to gravity, not any functional capability.
What sets Milton’s case apart is the use of public channels like YouTube for fraudulent misrepresentations, rather than traditional financial statements or corporate filings. Prosecutor Joshua Podolsky highlighted the personal nature of Milton’s social media communications, which garnered trust from many, making it an unusual white-collar fraud case.
Defense lawyer Marc Mukasey argued that Milton’s communications were motivated by genuine belief in his company, rather than greed, stating, “It was not a nefarious attempt to take advantage of people.” However, Podolsky countered, stating that Milton’s intentions were irrelevant; he “ultimately didn’t care” about harming investors.
Nikola, once heralded as the next Tesla Inc., drew investors following its June 2020 market debut through a blank-check merger. Despite initially surpassing Ford Motor Co. in market capitalization and elevating Milton’s net worth to $4 billion, the company’s credibility suffered when Milton was found to have exaggerated the capabilities of the Nikola One prototype. Short seller Hindenburg Research’s subsequent report further damaged Nikola’s reputation.
Milton resigned as executive chairman in September 2020 and faced federal charges the following July. His conviction is a notable success for federal prosecutors in Manhattan, who have been committed to combating corporate misconduct. This development follows the recent guilty verdict for FTX co-founder Sam Bankman-Fried, charged with defrauding investors in a cryptocurrency exchange.
While Milton is expected to appeal his conviction, he remains Nikola’s second-largest shareholder. Earlier this year, he advocated for leadership changes in the company, urging investors to reject proposals for director reelection and new share issuances.
The stock, which faced threats of delisting earlier this year, has experienced fluctuations, trading below $1 a share for most of April and May before briefly rebounding to over $3 in August. However, recent values have fallen back below $1, a far cry from the closing peak of nearly $80 in mid-2020.
At the time of this publication, Nikola Corp stock (NKLA) has witnessed a decline.
Nikola Corp
Current Price: $0.83
Change : -0.08
Change (%): (-8.31%)
Volume: 162.6M
Source: Tomorrow Events Market Data
The legal proceedings against Trevor Milton, the founder of Nikola Corp, bear the case number US v. Milton, 21-cr-478, in the US District Court, Southern District of New York (Manhattan).
