Nikola founder Trevor Milton “doubled down on his lies” after his chicanery involving a nonrunning prototype fuel cell truck was discovered, a federal prosecutor said in his opening statement of Milton’s securities and wire fraud trial Tuesday.
But Milton’s defense lawyers countered that he never intended to deceive anyone and that he committed no crimes. He is charged with two counts each of securities fraud and wire fraud.
“The government says that Trevor’s statements were significant to investors,” defense attorney Marc Mukasey told jurors. “But they were not material. The people who bought Nikola stock got exactly what they bargained for.”
The statement incorporated two points likely to be amplified during the four-to-five-week trial in the U.S. District Court for the Southern District of New York: How important is social media in influencing behavior and what responsibility do investors bear for knowing about their investments?
U.S District Judge Edgardo Ramos said last week he would allow tough questioning of Nikola investors expected to be called as prosecution witnesses. But he said defense attorneys could not blame them for their financial losses.
Nikola founder ‘lied to innocent investors’
“He lied to innocent investors, to make them buy, so he would profit,” said Nicolas Roos, assistant U.S. attorney and lead prosecutor. “In that, he was successful. He became a billionaire virtually overnight.”
Milton’s worth on paper approached $10 billion in the weeks after the electric truck company he founded in 2015 went public in June 2020. Forbes magazine ranked Milton at No. 249 on its Forbes 400 billionaires list in 2020 because of his enormous stake in the company. He has since sold hundreds of millions worth of shares and fallen off Forbes’ list.
Retail investors with accounts at brokerages like TD Ameritrade and on commission-free trading and investing app Robinhood chased Nikola’s share price above $90 before it began a steady decline.
“He went on Twitter. He booked himself on TV and flooded the airwaves with falsehoods on podcasts,” Roos said. “Milton knew that the more people who wanted to invest, the richer he’d get.”
During an initial public offering, special purpose acquisition company VectoIQ sold shares in a blank check company that would become Nikola for $10 each with rights to a warrant to buy more at $11.50 a share.
‘Former employee blew the whistle’ on Trevor Milton
“The defendant continued to lie about the first truck that was towed up on a hill and then released. A former employee blew the whistle,” Roos said. “Now Milton could have ’fessed up, that he jumped the gun. But he doubled down on his lies.”
But Mukasey said Milton’s many posts and interviews talked about the future of Nikola, not the present, when he made claims about trucks the company planned to build and hydrogen it planned to produce. Two years after Milton resigned from the company, evidence is building of a startup gaining traction.
Milton had plenty of help and support for his bragging — in the beginning.
“This was not a fake it till you make it company.” Mukasey said. “All of the facts were posted on Nikola’s website, and on a government website specifically designed to protect investors. Yes [Milton] was concerned about the stock price. He was right — Nikola was attacked by short sellers.”
None more vociferously than Hindenburg Research, whose expose came two days after Nikola announced a manufacturing partnership with General Motors to build an electric pickup truck in exchange for an 11% stake in Nikola. Milton left Nikola 10 days after the report. GM ultimately walked away. The Badger never existed, another point prosecutors will make.
“Trevor’s team turned on him,” Mukasey said. “They had applauded, but now they turned.”