Nikola Founder Trevor Milton Sentenced to Four Years
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Nikola Corp. founder Trevor Milton was ordered to spend four years behind bars for lying to shareholders about the electric truck maker’s progress.
Milton was sentenced Dec. 18 by U.S. District Judge Edgardo Ramos in Manhattan, more than a year after a jury convicted him of securities fraud and wire fraud for misrepresenting key details about the development of Nikola’s products and technology.
Prosecutors had sought a sentence “in line” with the 11 years recommended by probation officials, saying a lengthy term of incarceration was needed both to punish Milton and deter other corporate executives from similar misconduct.
Milton was in tears as he asked the judge to sentence him only to probation. He said he didn’t intend to mislead investors and made mistakes because of a lack of experience.
“I was not a very seasoned CEO,” he said.
The jury took only a few hours to convict Milton in October 2022 after a two-month trial featuring testimony from more than a dozen government witnesses and evidence including an infamous viral video that appeared to show a Nikola semi prototype traveling under its own power. It was actually rolling downhill thanks to gravity.
Milton’s case was unusual among white-collar fraud cases because he was accused of making misrepresentations through public channels like YouTube rather than in financial statements or other corporate filings. The way Milton used social media “seemed personal” and got a lot of people to trust him, prosecutor Joshua Podolsky said at his sentencing.
Defense lawyer Marc Mukasey said Milton’s communications were driven by his “true belief” in his company rather than greed. “It was not a nefarious attempt to take advantage of people,” Mukasey said. “It wasn’t trained on or aimed at particular people.”
MORE: Lawyers Argue Trevor Milton Shouldn’t Face Prison for Fraud
But Podolsky said it was “beside the point” whether Milton wanted to harm investors. “He ultimately didn’t care” if he did, the prosecutor said.
Nikola drew investors eager to find the next Tesla Inc. after it made its market debut through a June 2020 blank-check merger. For a time, Nikola had a higher market capitalization than Ford Motor Co., giving Milton a net worth of $4 billion.
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But soon after Nikola began trading, Bloomberg reported that Milton had greatly exaggerated the capabilities of one of its first prototypes, the Nikola One, describing it as a fully functioning vehicle even though the truck couldn’t be driven at the time because of missing parts. Three months later, short seller Hindenburg Research published a report accusing the company of deception and lying about its technology, sending the shares plummeting.
Milton stepped down as executive chairman in September 2020. He was charged by federal prosecutors the following July.
His conviction was a victory for federal prosecutors, who have vowed to crack down on corporate wrongdoing, and his sentencing comes just over a month after FTX co-founder Sam Bankman-Fried was found guilty of defrauding investors in the crytocurrency exchange.
Milton is likely to appeal his conviction. He had already asked Ramos for a new trial after the jury’s verdict, arguing it convicted him because of bad instructions from the judge and because one juror lied to get on the panel, but that motion was rejected in August.
Milton remains Nikola’s second-biggest shareholder and earlier this year called for leadership changes at the company, urging investors to reject company-backed proposals to reelect directors and allow new shares to be issued.
The stock traded below $1 a share for most of April and May, raising threats of delisting. While shares rebounded to more than $3 in August, they have since fallen back below $1, far below a closing peak of almost $80 in mid-2020.
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