Notes on the Trevor Milton Case

Charge: Securities Fraud
Case Reference: UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK 21 Cr. 2 1 CRIM COUNT ONE
Defendant: Trevor Milton
Period of Fraud: November 2019 - September 2020

Trevor Milton induced purchases of Nikola Corporation shares through false statements about products and technology.
Targeted non-professional investors (retail investors) via social media, television, and interviews.

Nikola One Prototype: Claimed it was a “fully functioning” semi-truck, while it was inoperable.
Badger Truck: Stated it was developed from the “ground up” with Nikola’s technology, despite reliance on third-party parts.
Hydrogen Production: Asserted Nikola was producing hydrogen at reduced costs, which was false; no hydrogen was being produced.
In-House Development: Claimed Nikola developed batteries and important components in-house, when they were sourced externally.
Reservations for Trucks: Misrepresented future deliveries as binding orders, when most could be canceled easily.

Value of Nikola shares fell dramatically after false claims were revealed, costing retail investors tens to hundreds of thousands of dollars.
Some lost life savings or borrowed funds invested in Nikola.

Milton aimed to enrich himself and elevate his stature as an entrepreneur, with aspirations to be among Forbes's 100 richest.
The market value of Milton's stakes increased, with Nikola valued at $3.324 billion by March 3, 2020, before falling sharply after fraud disclosures.

Milton founded Nikola in 2015 and was the CEO until June 2020. He then became the Executive Chairman.
Nikola labeled itself a designer/manufacturer of zero-emission vehicles and technology.
As of July 2021, Nikola was still considered a “pre-revenue company” having not sold production-ready vehicles.

SPAC Defined: A vehicle for private companies to go public, avoiding the traditional Initial Public Offering (IPO) route.
Unlike IPOs, SPACs do not have a quiet period; hence management can freely communicate before going public.
VectoIQ: The SPAC through which Nikola went public, enabling Milton to promote the company vigorously without regulatory constraints.
PIPE Investment: Nikola’s announcement of $525 million funding through a Private Investment in Public Equity (PIPE) allowed for further promotion.

Milton falsely claimed Nikola was able to produce hydrogen efficiently when in reality, they had not constructed any hydrogen production facilities.
No actual hydrogen has ever been produced by Nikola; prior supplies were from vendors.

Nikola One: Presented as operational when it was incomplete and untested.
Badger: Introduced as a nearly complete prototype when it was underdeveloped and used existing vehicle components without significant Nikola innovation.

Statements claiming over 14,000 binding reservations misrepresented the nature of these as most were non-binding commitments.

Trevor Milton's actions led to a significant financial impact on investors and raised essential questions of corporate governance and ethical practices in public disclosures. The indictment aims to address these acts through securities fraud charges, detailing how his misleading communications structured a scheme to deceive retail investors and inflate stock prices in favor of his financial interests.