All About the Nikola Motors Scandal That Led to a Prison Sentence for its Founder

All About the Nikola Motors Scandal That Led to a Prison Sentence for its Founder
Cover Image Source: The Nikola Motor fraud | Pexels

Zero-emission vehicles have been among the most anticipated inventions in recent times, but every claim about such technology isn't necessarily true. While Tesla has delivered electric cars, its rival Nikola tried to capture the market for heavy vehicles that cut down emissions. But a video purportedly showing a zero-emission truck in motion turned out to be fake and a court later found the ex-founder and chairman of Nikola Corporation guilty of defrauding investors by misleading them about the company's technological capabilities to artificially inflate its stock price. Milton was convicted of one count of securities fraud and two counts of wire fraud. The judge sentenced him to four years in prison along with a fine of $1 million.


 
 
 
 
 
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A post shared by Trevor Milton (@lakepowelltrevor)


 

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In June 2020, Nikola's stock surged to $90 per share following its merger, making Trevor Milton a billionaire overnight. However, suspicions arose when Hindenburg Research released a damning report on September 10, 2022, accusing Milton of fraudulent activities to deceive investors. The report debunked many of his claims, revealing his promises of zero-emission hydrogen-fueled trucks.

Milton's alleged proprietary technology was nonexistent, as evidenced by a promotional video, "Nikola One in Motion," which depicted a semi-truck rolling down the road. Other false claims included ownership of natural gas and production of hydrogen trucks at a lower cost. Moreover, Nikola's headquarters lacked the purported 3.5 megawatts of solar panels.

Investigations uncovered that Nikola sourced components from third parties and disguised them as proprietary by concealing their branding with masking tape. Milton publicly admitted to these allegations, acknowledging his attempt to defraud investors for personal financial gain.

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Following these revelations, Nikola's shares plummeted, prompting Milton's resignation from the company in September 2020. The stock's decline had a ripple effect, impacting General Motors (GM) shares by 4% and causing Nikola's stock to plunge by 36%. The company's board of directors, incensed by the situation, initiated a private investigation conducted by the SEC to uncover the reasons behind the significant financial and reputational losses.

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In the wake of the collapsing share prices, and the investigation's findings, Nikola lost partnerships and deals for collaborations, including those with BP (British Petroleum Company PLC) and Republic Services.

Image Source: | Photo by Stephen Yang | Bloomberg via Getty Images
Image Source: Trevor Milton | Photo by Stephen Yang | Bloomberg via Getty Images

 

In response to the allegations, the company announced the cancellation of its Powersports unit and production plans. Instead, they shifted focus to producing 50 and 100 Nikola Tre Vehicles, along with investing $50 million in a hydrogen factory aimed at fueling sem-truck stations. Supervised by Wabash Valley Resources, this initiative aimed to bolster hydrogen production.

Nikola expanded its presence by announcing the opening of five new class 8 truck dealerships across various states, including Arizona, Texas, Colorado, California, New Mexico, Delaware, Florida, Maryland, and Virginia.


 
 
 
 
 
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A post shared by Nikola Corporation (@nikolamotorcompany)


 

 

Milton, a Utah-born entrepreneur initially tried his hands at sales and marketing before getting into startups, which, despite significant investments, encountered numerous challenges and ultimately failed. Following his previous ventures, Trevor founded dHybrid Systems before establishing Nikola Corporation in 2015.

Nikola aimed to revolutionize energy solutions with a focus on zero-emission vehicle production. With increasing demand and sales, Nikola Motor gained prominence, paralleling Milton's soaring net worth, which peaked at $1.2 billion. However, his fortunes did not last too long. 

Trevor Milton- The Ex Founder and fraudster behind the Nikola Motor scam| Photo Source: WikiCommons
Image Source: Trevor Milton | WikiCommons

 

Milton's purported misrepresentations not only led to financial losses for Nikola Corporation but also tarnished the company's reputation and eroded trust in its leadership. Moreover, the aftermath of the fraud allegations has highlighted the importance of regulatory oversight and transparency in corporate governance to prevent similar instances of fraud in the future. It has also resulted in the company bearing losses, with its stock valued at less than $1 today.

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