Prosecutors: "Founder Lied About Almost Every Aspect of the Business"
Nikola Stock Plummets 80% from Peak
[Asia Economy Reporter Kim Suhwan] Trevor Milton, the founder of Nikola, a U.S. hydrogen electric vehicle company once dubbed the 'Second Tesla,' has been indicted on charges including securities fraud.
On the 29th (local time), The Wall Street Journal (WSJ) reported, "Milton has been charged with lying to investors about Nikola's business."
According to the indictment released that day, the U.S. Attorney's Office for the Southern District of New York in Manhattan determined that Milton, who served as the company's CEO from November 2019 to September last year, deceived investors about products, technology, and future prospects to inflate the stock price.
Milton faces two counts of securities fraud and one count of wire fraud, and if found guilty on all charges, he could face up to 25 years in prison.
The prosecution stated, "Milton repeatedly lied and made misleading statements directly to the public through social media, broadcast, newspaper, and podcast interviews, targeting non-professional individual investors (retail investors)," adding, "He lied about nearly every aspect of the business."
In particular, the prosecution pointed out that Milton "committed fraud to enrich himself and elevate his status as an entrepreneur."
In fact, at the time when Nikola's stock price surged last year, Milton's total wealth reached $8.5 billion (approximately 9.75 trillion KRW). The prosecution revealed that Milton wanted to be listed among the richest Americans by Forbes.
WSJ reported that Milton denies all charges against him. Milton's legal team argued, "He did nothing wrong," and "The government ignored crucial evidence and did not sufficiently question witnesses. This indictment is merely the result of an incomplete investigation."
Following the news of Milton's indictment, Nikola's stock price on the New York Stock Exchange plunged as much as 11% intraday. However, the prosecution did not indict Nikola as a corporation.
Nikola stated, "We are faithfully executing the plans we have announced so far," and "We expect to launch our self-developed electric truck within this year."
Nikola, which attracted attention as the 'Second Tesla' by unveiling plans to develop hydrogen electric trucks, was founded in 2015 and successfully went public on the New York Stock Exchange last year, five years after its establishment.
Subsequently, it formed a strategic partnership with General Motors (GM) and received investment from Hanwha Group, achieving rapid growth.
However, after a short-seller report claiming "Nikola is a fraudulent company" was released, the company's stock price began to plummet, falling about 80% from its peak as of this month.
Short-seller firm Hindenburg Research caused a major stir with its September report last year, alleging that Nikola deceived investors despite lacking the core technology to actually produce hydrogen electric trucks. There were also suspicions that the electric truck driving footage Nikola previously released was filmed rolling down a hill rather than powered by its own engine.
Nikola responded to the report only by stating it was "an inaccurate report," without any substantial rebuttal, which further fueled investors' distrust.
After the stock price plunged and GM significantly reduced its partnership, Milton resigned as CEO two weeks after the report's release amid the backlash.
Initially denying the allegations, the company disclosed the results of an internal investigation conducted by an external law firm in February this year, admitting that Milton made many inaccurate statements from 2016 until the IPO last year.
Hanwha Group, which invested in Nikola, recently announced it plans to sell half of its stake in the company within this year.
WSJ also reported that Milton had been involved in numerous lawsuits even before founding Nikola.
In 2009, Milton established a startup with the goal of producing natural gas trucks with high fuel efficiency. The company signed contracts worth $16 million, but the trucks ultimately released reportedly underperformed expectations.
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