Nikola Founder Trevor Milton Charged With Securities Fraud

“With a purpose to drive investor demand for Nikola inventory, Milton lied about practically each side of his enterprise,” Manhattan U.S. Legal professional Audrey Strauss mentioned at a information convention Thursday.

The Securities and Change Fee additionally filed a civil grievance Thursday towards Mr. Milton.

Mr. Milton pleaded not responsible to the costs in federal courtroom in Manhattan on Thursday and was launched on $100 million bond. A spokesman for his legal professionals—Brad Bondi, Marc Mukasey and Terence Healy—mentioned Mr. Milton was harmless. “Mr. Milton has been wrongfully accused following a defective and incomplete investigation through which the federal government ignored essential proof and didn’t interview essential witnesses,” the spokesman mentioned.

The federal costs signify one other blow for Nikola, which was as soon as price greater than Ford Motor Co. however has struggled since questions on its expertise and merchandise surfaced final yr.

The Phoenix-based startup was certainly one of a number of transportation-focused companies to go public in 2020 by means of reverse-merger offers, capturing the eye of Wall Road as investor enthusiasm intensified for electrical automobiles and different alternative-propulsion methods.

Mr. Milton had attracted help from some high-profile names, together with former Basic Motors Co. govt Stephen Girsky and activist investor Jeffrey Ubben, and briefly struck a take care of GM that was later scrapped.

Nikola wasn’t charged. The corporate mentioned that Mr. Milton hasn’t been concerned in its operations or communications since his resignation. “Nikola has cooperated with the federal government all through the course of its inquiry,” an organization assertion mentioned. “We stay dedicated to our beforehand introduced milestones and timelines and are targeted on delivering Nikola Tre battery-electric vans later this yr from the corporate’s manufacturing amenities.”

Nikola’s inventory was down roughly 8% in morning buying and selling.

The federal costs are the most recent and most excessive instance of the challenges different transportation startups have confronted in latest months, following well-received debuts on Wall Road that originally despatched their inventory hovering.

Electrical-truck upstart Lordstown Motors Corp. , which listed final fall by means of a SPAC merger deal, has additionally drawn the scrutiny of federal investigators. Earlier this month, it confirmed the Justice Division is probing its enterprise, investigating issues associated to its reverse merger deal and preorders for its forthcoming pickup truck, the Endurance.

The U.S. Securities and Change Fee can also be investigating Lordstown, the corporate has disclosed.

Mr. Milton, a self-described serial entrepreneur, based Nikola in 2015 with the ambition of disrupting the commercial-trucking {industry} by promoting and leasing large, semi-trucks powered by batteries and hydrogen gas. He was recognized for making daring statements and displaying a charisma that helped encourage staff and appeal to traders.

Mr. Milton pitched the corporate on social media, tv and podcasts to small traders who poured in when it went public with a special-purpose acquisition firm, or SPAC. The indictment famous that, not like when shares are first issued by means of an IPO, executives after a SPAC merger aren’t restricted of their means to discuss an organization.

Mr. Milton defined on a podcast that a bonus of a SPAC was that he might talk with the market, Ms. Strauss mentioned. She mentioned he exploited this characteristic of a SPAC, driving retail traders to purchase his firm’s inventory.

Prosecutors mentioned a few of Mr. Milton’s claims have been false and from November 2019 to September 2020, amounted to a scheme to defraud particular person, nonprofessional traders.

Mr. Milton’s scheme was motivated by wealth and fame, prosecutors mentioned. As Nikola’s inventory worth went up, Mr. Milton’s shares have been as soon as price a minimum of $8.5 billion, prosecutors mentioned, noting that he aspired to be featured on Forbes’s record of America’s richest individuals.

Mr. Milton’s false statements included these about Nikola One, a semi-truck prototype, the indictment mentioned.

To create one video detailed within the indictment, Mr. Milton directed a Nikola worker to make use of footage of a Nikola One—which wasn’t protected and had no batteries—rolling down a hill, prosecutors mentioned. Within the video, which appeared on social media, the truck seems to be driving with out an incline, in line with the indictment.

Mr. Milton additionally misled traders about an electric- and hydrogen-powered pickup truck referred to as the Badger, the indictment mentioned. The Nikola founder additionally lied about reservations for future supply of the semi-trucks, saying they have been binding orders that represented billions in income, in line with the indictment. Prosecutors mentioned that in actuality, many of the orders could possibly be canceled at any time.

In September, Nikola was rocked by claims raised in a report by New York-based brief vendor Hindenburg Analysis. The report accused Nikola and Mr. Milton of constructing deceitful statements and exaggerating the progress on a few of its key expertise, together with on hydrogen-powered semi vans.

Nikola’s share worth slid after the report. Prosecutors mentioned some particular person traders misplaced a whole lot of hundreds of {dollars} on the corporate.

The corporate mentioned an inner evaluate discovered that the Nikola One video gave a deceptive impression it was drivable and that Mr. Milton had made a number of inaccurate statements. Specifically, the corporate mentioned that it discovered 9 statements by the corporate or Mr. Milton have been wholly or partially inaccurate.

Nikola didn’t immediately deal with different allegations within the brief vendor’s report aside from to say: “In different respects, the Hindenburg article’s statements concerning the firm have been inaccurate.”

Mr. Milton—who nonetheless has a roughly 20% stake in Nikola, in line with FactSet—had constructed a number of companies earlier than Nikola that had typically ended up in disputes, litigation and disillusioned traders.

He was capable of persuade a number of main finance and auto-industry figures to assist him construct Nikola, together with Mr. Ubben, the founding father of San Francisco-based ValueAct Capital Administration LP, who remains to be on Nikola’s board. Mr. Ubben, who couldn’t instantly be reached, advised Bloomberg final yr that the corporate went public too early.

Basic Motors Co. had additionally briefly struck a take care of Nikola to assist it develop and manufacture new fashions, a transfer that had on the time despatched inventory in each firms surging. In change for its companies, GM mentioned it will obtain an 11% stake in Nikola, a would-be rival for electrified pickups.

GM later pulled out of the fairness deal and as a substitute revealed a stripped-down settlement, saying it intends to supply Nikola with fuel-cell expertise. A GM spokesman declined to touch upon the costs towards Mr. Milton.

When Mr. Milton stepped down in September, Nikola appointed board member Mr. Girsky as govt chairman. Mr. Girsky, a former GM govt, launched Mr. Milton to GM Chief Govt Mary Barra, opening the discussions that led to the unique deal.

Mr. Girsky declined to touch upon the costs towards Mr. Milton and deferred to Nikola’s assertion.

Mr. Girsky joined Nikola’s board final summer time, when the startup mixed with a publicly traded special-purpose acquisition car, VectoIQ Acquisition Corp., which he led and partly owned.

Mr. Milton additionally drew help from CNH Industrial NV and auto-supply large Robert Bosch GmbH. Each firms declined to remark.

—Mike Colias contributed to this text.

Write to Corinne Ramey at Corinne.Ramey@wsj.com