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Trevor Milton of Nikola Begins Trial in Fraud Case

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A would-be truck maker is on trial for fraud. The incident is seen as a lesson in the dangers of investing in an electric vehicle company that has yet to make sales or deliver a product.

Trevor Milton, founder of electric truck maker Nikola Motors, stems from accusations that he exaggerated the company’s technology and caused devastating losses to those who bought Nikola shares before it collapsed. faces federal indictments for fraud and securities fraud.

The trial, which is expected to last four to five weeks after jury selection began on Monday, is being held in the US District Court in Manhattan. Mr Milton has pleaded not guilty. He is represented by Mark Mukassy, ​​who served as president of the Trump Organization, and Edward Gallagher, a Navy SEAL member accused of war crimes in Iraq.

In 2020, Nikola was briefly worth more on the stock market than Ford Motor Co. amid an investor frenzy about its potential to become the Tesla of the truck industry.

Nikola shares plummeted after reports that Milton made false claims about Nikola’s technology. This involved making a video of the truck rolling down a hill to make it look like the company had a working prototype.

Mr. Milton soon resigned and Nicola remains active. A company spokesperson said the company has started building a battery-powered truck called the Tre at its Arizona plant and has delivered about 50 to dealers. Nikola reported a net loss of $173 million on his $18 million in sales in the three months to June.

Last year, Nicola agreed to pay $125 million in civil penalties to settle a fraud investigation by the Securities and Exchange Commission. Nicola denied any wrongdoing as part of the settlement.

Nikola shares have recently traded at around $5.40, down from a record close of around $66 in June 2020.

This case can also be seen as an example of the risk of investing in a stock exchange listed special purpose acquisition company (SPAC) before owning the assets. Nikola went public in 2020 by merging with his SPAC called VectoIQ Acquisition Corporation, avoiding some of the regulatory scrutiny typically applied to initial public offerings.

Once the rage on Wall Street, SPAC has lost much of its luster after many poor performances.

With the exception of Tesla, many electric car makers have struggled to ramp up production or capture significant market share. As traditional car and truck makers delayed their introductions of battery-powered products, their chances of success are fading.

In Nikola’s case, federal prosecutors allege that Milton promoted the stock in interviews and on social media to attract less sophisticated and smaller investors.

“We need to make sure we have private investors on our side,” he said in an email the day before Nikola announced its merger with VectoIQ, according to the indictment against him.

Milton made numerous false statements, according to the indictment, claiming in 2016 that Nikola had a fully functioning truck, but that the vehicle had no gears or motor. The indictment also states that Nicola posted the video on the Internet. The video appeared to be driving along a road while the prototype was running low on power and sprinting downhill.

Additionally, according to the indictment, Milton alleged in 2020 that Nikola was developing the Badger pickup “from the ground up” using proprietary technology. In fact, the government says the technology was provided by a third party and the prototype Badger was built using parts from a Ford F-150 pickup.

Milton later claimed in a podcast interview that the Badger would beat the F-150, prosecutors say.

At one point, he said on Twitter that Badger has a drinking fountain fed by wastewater from a hydrogen fuel cell. However, according to the indictment, Milton did not discuss the feature with engineers and later searched the Internet to determine if it was feasible. (It seems that was not the case.)

In addition to building trucks, Nikola planned to build a network of hydrogen fuel stations for trucks with fuel cells. According to the indictment, Milton repeatedly alleges that Nikola had already built a station that could independently produce hydrogen cheaply.

“Nicola never obtained a permit or produced hydrogen, let alone build a hydrogen production station,” the indictment states.

Smaller investors bore the brunt of the losses when Nikola stock plunged more than 40% in September 2020 after Milton resigned, according to the indictment. Some institutional investors exited early because they had “more complete access to information about Nikola’s products and technology,” prosecutors said. These investors “were able to sell their shares for a substantial profit.”

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