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Nikola founder convicted on three counts of fraud

Investors in Trevor Milton's hydrogen-powered truck company made him a billionaire overnight, even without a working prototype

MANHATTAN (CN) — A federal jury returned a guilty verdict Friday against Trevor Milton, setting up the billionaire founder of the zero-emission truck maker Nikola to spend up to 20 years in prison.

Southern District of New York prosecutors accused Milton, 40, of using his social media presence and frequent appearances on television and podcasts to repeatedly dupe amateur retail investors as his startup company was set to go public.

Trial began a month earlier, and jurors deliberated for five hours before finding Milton guilty on one count of securities fraud and two counts wire fraud. The jury acquitted Milton on the top count, securities fraud under Title 18, which is punishable by up to 25 years in prison.

U.S. Attorney Damian Williams applauded the verdict in a statement Friday afternoon. "Let this case serve as a warning," Williams said in a statement Friday afternoon, "to anyone who plays fast and loose with the truth to get investors to part with their money. It won’t end well.”

Like Elon Musk’s Tesla company, Nikola benefited on Wall Street from investor infatuation with electric vehicles, considered to be the future of the automobile industry. But federal prosecutors say Milton lied repeatedly to represent that Nikola had manufactured operable trucks fueled by hydrogen gas, and that the company had billions of dollars in contracts when they didn’t exist.

Throughout the trial, the government repeatedly showed jurors a video released by Milton that seemed to show the Nikola One prototype cruising on a highway.

"You're going to see that this a real truck, this is not a pusher," Milton can be heard promising in the video.

But the government's first witness, former Nikola contractor and engineer Paul Lackey, testified the truck was not operational and, indeed, needed to be pushed.

That the truck was moving at all was because of gravity. The Nikola crew had towed it to the top of a hill and allowed to roll down. It was powered by natural gas, but the words “hydrogen electric” appeared stenciled on the side of the truck.

Milton’s defense attorneys insisted that Milton was leading the company in good faith, telling jurors he had no intention of deceiving anyone about the company’s trucks or technology.

“The government never proved fraud,” defense lawyer Marc Mukasey had said in his closing summation on Thursday. “There were no crimes here and Trevor Milton is not guilty.”

In the lead up to Nikola going public, Mukasey told jurors, the board wanted to model Milton’s role in the company’s promotion strategy after Virgin Group founder Richard Branson and his Virgin Galactic space flight company.

Assistant U.S. Attorney Matthew Podolsky pooh-poohed the defense. “This is the robber blaming the guard for not stopping him,” he said.

In the wake of a report a September 2020 report by Hindenburg Research that said Nikola’s success was “an intricate fraud,” Milton voluntarily stepped down as executive chairman of Nikola and a member of its board. He was indicted a year later but has remained free on $100 million bail secured by properties he owns in Utah.

Meantime, the company paid $125 million to settle a civil case against it by the Securities and Exchange Commission. Nikola, which continues to operate from an Arizona headquarters, didn’t admit any wrongdoing.

One investor, Peter Hicks, testified at trial that Milton’s trumped up statements about Nikola’s prospects in March 2020 induced him to take millions of dollars in Nikola stock options as partial payment from Milton for a sprawling 4,600-acre ranch in Utah.

Hicks, a Massachusetts-based real estate investor, testified he had purchased the property earlier that month for $6.8 million and netted over $3 million in profit from the deal after selling his Nikola shares.

Come September of that year, Nikola’s stock price plunged and investors suffered heavy losses as reports questioned Milton’s claims that the company had already produced zero-emission 18-wheel trucks.

Milton’s criminal trial in the Southern District of New York went before U.S. District Judge Edgardo Ramos, an Obama appointee.

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