Trevor Milton was accused of boasting about nonexistent technology to inflate the stock price of Nikola, a maker of electric trucks.
A federal jury on Friday found Trevor Milton guilty of defrauding investors by lying about the supposed technical achievements of Nikola, the electric truck maker he founded.
Mr. Milton was convicted of one count of securities fraud and two counts of wire fraud, the most serious of which carry a maximum prison sentence of 20 years. He was acquitted on an additional count of securities fraud. The jury in U.S. District Court in Manhattan delivered the verdict after about four weeks of testimony and about six hours of deliberation.
Prosecutors portrayed Mr. Milton, 40, as a serial fabricator who wooed investors by falsely claiming that Nikola was close to producing long-haul trucks that could run emission-free on cheap hydrogen.
“Trevor Milton is a con man,” Jordan Estes, assistant U.S. attorney, said Thursday as she summarized the government’s case. “He lied to investors to get their money, plain and simple.”
Defense attorneys argued that Mr. Milton did not intend to defraud anybody and that his statements were not responsible for a plunge in Nikola's stock price that wiped out billions of dollars in value.
Marc Mukasey, a defense lawyer, acknowledged that Mr. Milton sometimes spoke in the present tense about things Nikola hoped to achieve in the future. “He loved Nikola,” Mr. Mukasey told jurors on Thursday, likening Mr. Milton to an overenthusiastic parent who brags about his child.
On Friday, Mr. Mukasey said, “We respect the verdict, but we’re going to keep fighting.”
Mr. Milton, who had appeared cheerful during much of the trial, shook his head in apparent disbelief after hearing the verdict. His wife, Chelsey Milton, leaned her head against the back of a courtroom bench and sobbed.
U.S. District Judge Edgardo Ramos, who presided over the trial, allowed Mr. Milton to remain free on a $100 million bond until sentencing in January.
The case provided a lesson in the hazards of investing in fledgling “pre-revenue” electric vehicle makers that have ideas but limited or nonexistent sales. With the exception of Tesla, new carmakers have struggled with manufacturing problems.
In a recent example, Rivian, a maker of electric pickup trucks, said last week that it was recalling almost all of the vehicles it has produced because a small number have an improperly tightened fastener that could cause the steering to malfunction.
The Milton trial was also a test of prosecutors’ ability to hold managers of publicly traded companies accountable for statements they make on social media and other public forums that can cause share prices to gyrate. Mr. Milton was a prolific user of Twitter and frequently appeared on podcasts and business news programs.
A college dropout with no formal training in engineering, Mr. Milton founded Nikola in 2015 in the basement of his Salt Lake City home. The company listed on Nasdaq in 2020 by merging with a special purpose acquisition corporation, or SPAC, called VectoIQ Acquisition Corporation. VectoIQ is managed by Stephen Girsky, a former high-ranking executive at General Motors. The deal with the so-called blank-check corporation allowed Nikola to avoid some of the regulatory scrutiny usually applied to initial public offerings.
After the stock market listing made him wealthy, Mr. Milton, who owned 25 percent of Nikola shares, went on a spending spree, buying luxuries including a Gulfstream jet and a multimillion-dollar home in the Turks and Caicos Islands. In about six months during 2020, according to testimony, Mr. Milton spent more than $80 million.
Nikola shares peaked near $80 in June 2020, when the company was worth more than Ford Motor. Shortly after, the investment firm Hindenburg Research issued a report accusing Mr. Milton of making numerous false assertions about the company's technology, pointing to a video in which a truck was rolled down an incline to make it look like a working prototype.
Mr. Mukasey dismissed the video as mere “special effects.”
“It’s certainly not a crime to use special effects,” Mr. Mukasey told jurors. “Otherwise the government would have to indict the Energizer Bunny.”
Mr. Milton resigned as executive chairman a few weeks after the Hindenburg report. Nikola shares closed Friday at $3.06.
Last year, Nikola agreed to pay a civil penalty of $125 million to settle a fraud investigation by the Securities and Exchange Commission. The company did not admit wrongdoing as part of the settlement.
Nikola aspired to be the Tesla of the trucking industry — both companies took their name from Nikola Tesla, a pioneer in developing alternating-current technology. Nikola planned to build trucks that would be powered by emission-free hydrogen fuel cells. The company would build a network of hydrogen fueling stations along major highways, much as Tesla built a network of charging stations.
During the trial, prosecutors played video interviews in which Mr. Milton claimed Nikola was already producing “green” hydrogen with renewable energy for less than the cost of diesel, a major milestone. “Game is over for diesel,” Mr. Milton said on Twitter.
In fact, Nikola had produced “not one molecule” of hydrogen, Ms. Estes said. Others in the fledgling green hydrogen industry are still struggling to produce the gas cheaply enough to undercut diesel.
Mr. Milton also said he had billions of dollars in binding contracts with trucking companies to buy Nikola vehicles. The “contracts” were just reservations that could easily be canceled, prosecutors contended.
Among the witnesses was Scott Damman, a senior manager at General Motors, which planned to build a battery-powered pickup truck, the Badger, with Nikola. The announcement of the Badger in February 2020 caused a spike in Nikola's stock price.
Mr. Damman testified that G.M. would have manufactured the truck and supplied all of the engineering and technology, while Nikola contributed some of the design and marketing.
Nonetheless, according to testimony, Mr. Milton said on Twitter and other forums that Nikola was responsible for “100 percent” of the technology in the Badger, portraying G.M. as little more than a supporting player. G.M. pulled out of the partnership soon after the Hindenburg report, and the Badger was never produced.
Other Nikola executives including Mark Russell, the chief executive, and Kim Brady, the chief financial officer, warned Mr. Milton repeatedly that his statements could backfire, prosecutors contended. The executives even staged an “intervention” where they tried, unsuccessfully, to get Mr. Milton to hew to the truth, according to witnesses.
Mr. Mukasey, the defense lawyer, pointed to internal Nikola emails in which the executives praised Mr. Milton’s media appearances. “They were telling Trevor what a good job he was doing,” Mr. Mukasey said.
The convictions include a charge that Mr. Milton defrauded a man who sold him a ranch in Utah. Mr. Milton paid for the ranch in part with Nikola stock options that proved to be worthless.
The acquittal on one of the securities fraud counts offered Mr. Milton a bit of relief. A conviction on that charge would have exposed him to a maximum sentence of 25 years.
Nikola, based in Phoenix, continues to operate, producing a limited number of battery-powered trucks in cooperation with established companies including IVECO, an Italian truck maker that is manufacturing Nikola vehicles in Germany. Michael Lohscheller, an auto industry veteran who was previously the chief executive of the German carmaker Opel, was named president of Nikola in August. .
Stefan Hartung, chief executive of the German electronics maker Bosch, said in an interview this month that he still believed in Nikola. Bosch, one of the world's largest makers of components for the vehicle industry, is supplying fuel cell technology for Nikola trucks being developed.
“We are now pretty far in terms of industrialization capability,” Mr. Hartung said. “This vehicle can be built.”
Julie Creswell and Neal E. Boudette contributed reporting.
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