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Nikola Stock Tumbles: DoJ Preps Fraud Charges Against Former CEO Trevor Milton

Federal prosecutors are set to levy fraud charges against former Nikola CEO Trevor Milton.

Nikola  (NKLA) - Get Nikola Corp. Report shares fell sharply Thursday amid reports that founder and former CEO Trevor Milton will face securities fraud charges filed by federal prosecutors later this morning.

The U.S. Justice Department said Milton, who left Nikola in September of 2020, made fraudulent statements about the electric truckmaker's product and technology development between November 2019 and September 2020, according to multiple media reports.

In September of that year, analysts at Hindenburg Research, a noted short-seller, published a note accusing the electric-truck startup of being "an intricate fraud built on dozens of lies."

Milton, who was replaced by former General Motors' GM vice chairman Stephen Girsky, was accused by Hindenburg of orchestrating an "intricate fraud built on dozens of lies", citing data from phone calls, text messages and emails that it says detail dozens of false statements.

Hindenburg also claims Milton hyped his company's battery technology after becoming aware of issues related to a planned acquisition in October of last year, all of which the 39-year old entrepreneur has strenuously denied even as reports emerged of a Securities and Exchange Commission investigation and a Department of Justice probe into the claims.

Hindenburg also says claims Milton hyped his company's battery technology after becoming aware of issues related to a planned acquisition in October of last year.

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"Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry," Milton's legal team said in a statement emailed to TheStreet. "Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses."

"From the beginning, this has been an investigation in search of a crime. Justice was not served by the government’s action today, but it will be when Mr. Milton is exonerated," the statement added. 

Nikola shares were marked 10.4% lower in early afternoon trading Thursday following news of the Milton charges to change hands at $12.72 each. The stock traded as high as $66 each in June of 2020.

In April of last year, industry veteran Jesse Schneider, who was hired as the group's vice president of hydrogen and fuel cell technologies in 2018, left Nikola to found a "fast-moving startup to fuel ZEV vehicles" based in California.

Fuel cells using hydrogen extracted from water using electrolysis are seen by some analysts as key to the transport industry's clean-energy ambitions and the government's desire to lower carbon emissions.