It’s not every day that a billion-dollar fraud is unveiled for the world to see, yet Nikola is one of those cases in which reality surpasses fiction. When the fraud accusations against Nikola’s former CEO Trevor Milton were published in late 2020, the stock of the then highly-promising hydrogen-powered truck manufacturer plummeted and so did the expectations of seeing new companies bet on environmental approaches to vehicle production.
Despite being convicted of fraud in 2022, Milton subsequently filed a lawsuit against his former Nikola associates, and successfully put the case in the public radar again. The renewed interest has also brought up many new questions about Milton’s decisions while in Nikola, his modus operandi, and the real reason he’s looking for legal revenge after his conviction.
Are you also curious about these things? Keep with us to find out more!
Contents
What Happened?
From the outset and up until September 2020, everything seemed to be going great for Nikola. With its promises of developing electric trucks which would be powered by hydrogen, the company was considered to be visionary and promising, despite having sold zero vehicles since its inception in 2014.
While it isn’t rare for companies and highly innovative start-ups to take several years before acquiring the capital, assets, and technology necessary to live up to their promises, this wasn’t the case with Nikola. At the forefront of the company was Trevor Milton, a visionary entrepreneur whose idea of creating new powering technologies for vehicles led him to establish Nikola, and acquire a $23 million property in Arizona in 2019, which would serve as the company’s plant.
Back then, Nikola with Trevor as its Chief Executive Officer (CEO) assured that the company’s plant would start producing fleet test hydrogen-powered trucks by 2021, and planned on mass-producing thousands of vehicles a year by 2023. On top of that, Trevor revealed plans to set up hundreds of hydrogen fueling stations around the world.
The expectations were high, to say the least, as the company had managed to raise $300 million in capital at the time and estimated the construction costs of the plant at $75 million.
What Was The Fraud About?
While all the goals set by Nikola were exciting from a business and technological perspective, the company fell short of its promises. In early 2020, good news seemed to come in waves for Nikola, as the company merged with VectoIQ Acquisition Corp. and prompted its listing on the NASDAQ stock. This also meant that Trevor passed from being CEO to Executive Chairman, while his former spot was taken by Mark Russell, Nikola’s former president.
We're thrilled to welcome two new groups of #NewHires that joined the Nikola Fam! Looking to join a company that's changing the automotive and tech industry? We're hiring! https://t.co/x7oly1zLXk #NikolaNewHires #NowHiring #WereHiring pic.twitter.com/P6ffMhlcFq
— Nikola Corporation (@nikolamotor) February 19, 2020
Later in September, General Motors acquired 11% of Nikola’s stakes valued at $2 billion, immediately causing the company’s shares to pop by 53%. However, the joy didn’t last long for Nikola, as only two days after announcing its deal with General Motors, the firm Hindenburg Research posted a thorough report accusing Nikola of misleading practices, describing their operations as an ‘intricate fraud’.
In the report, Hindenburg pointed out that Trevor had made baseless claims about Nikola’s technology and production capacity, pointing out that the company hadn’t developed hydrogen-fueled vehicles, contrary to what they had led people to believe during their showroom exposures to attract new investors. On top of that, Nikola was accused of rolling one of their alleged prototypes down a hill to fake its propulsion in an edited video posted on social media.
Legal Consequences
As expected, Nikola vehemently denied Hinderburg Research’s allegations with Trevor Milton describing the report as an attempt to ‘manipulate the stock’. He promised to refute the claims with evidence and assured that Nikola’s products had been tested by ‘credible companies and investors’, though that didn’t stop their shares from plummeting.
The next couple of months saw Trevor resigning from his role for personal reasons, while several companies terminated their association with Nikola and others backed away from future deals, including General Motors. On top of that, the US Securities and Exchange Commission started an independent investigation into the fraud allegations, leading Nikola to admit that some of the statements made by Trevor about the company’s processes and milestones were partially or totally ‘inaccurate’, and agreed to settle the fraud charges with $125 million.
In mid-2021, Trevor was indicted with stock and criminal fraud for lying about Nikola’s processes, including unfinished prototypes, its developed technology, and various other business aspects. He was found guilty and sentenced to four years in prison in 2023, on top of being fined $1 million.
For its part, Nikola continued its operations and delivered its first batch of vehicles in 2022.
Another Legal Battle
Despite the outrageous fraud case involving him, Trevor Milton wasn’t ready to leave things as they were. One year after receiving his four-year-in-jail verdict, Trevor went on to sue several of his former Nikola associates and co-executives.
As stated in court documents filed by Trevor, he was supported and encouraged by Nikola’s legal advisor Britton Worthen to post some of the statements which landed him behind bars. According to Trevor, he often sought legal advice from Britton about social media posts, news releases, and other informative events related to Nikola’s products, obtaining positive responses from the attorney, who at the time was both Trevor’s colleague and a family friend.
Nonetheless, Trevor accuses Britton and a handful of other former and current executives of Nikola’s of blindsiding him, as they had allegedly failed to communicate their concerns about his marketing and business practices to him, while making it a topic of discussion among other circles inside the company. Other people mentioned in the suit are Mark Russell, Kim Brady, Stephen Girsky and Steve Shindler.
The $1 billion suit also accuses Trevor’s former associates of lying to takeover his spot in the company and save themselves from jail.
What Will Happen Now?
The future is still uncertain for Nikola as a company, as it was reported that several of its vehicles caught fire due to malfunctioning batteries. This led the company to stop the distribution of the artifacts in 2023, causing its shares to plummet.
With that being said, it’s unclear what route Trevor Milton’s new suit will take, but the case will certainly bring up new details about the situation inside Nikola’s inner workings between 2016 and 2020, which is the time span when he made the allegations that landed him a four-year prison sentence. Nonetheless, only time will tell what will happen to all of them.
