Nikola Corp. founder Trevor Milton was sentenced Monday to four years in federal prison and a $1 million fine after a legal saga began with a short seller's report that the electric truck maker was on an “ocean.” of lies”.
Milton was allowed to remain free on the $100 million bond he posted ahead of his trial in 2022. No handover date has been set.
Prosecutors sought an 11-year prison sentence, a $5 million fine, the seizure of a Utah ranch that was the subject of one of Milton's three fraud convictions, and an unspecified amount of restitution to investors. Milton applied for parole. The revised federal sentencing guidelines suggested 27 to 33 years and nine months. U.S. District Judge Edgardo Ramos said he was sentencing Milton to four years in prison on each of the three convictions, to be served concurrently.
According to the U.S. Sentencing Commission's Judiciary Sentencing Information database, 29 white-collar criminals convicted in the past five years received an average sentence of 16 years and four months.
In their sentencing recommendation, prosecutors pointed to numerous false and misleading statements about Nikola's achievements and technological capabilities, including:
Reasons for conviction
During the two-and-a-half-hour sentencing hearing in U.S. District Court in Manhattan, New York, the government emphasized that Milton caused real harm to real people.
“He lied repeatedly and did his best,” Assistant U.S. Attorney Matthew Podolsky told Ramos. “General deterrence is important. The case gained widespread notoriety in the press. People listened to podcasts. The message needs to be conveyed that you have to be honest. A message needs to be sent.”
Milton's defense attorney, Marc Mukasey, said Milton committed no malice in his actions.
“Trevor openly expressed to executives his strong belief that communicating with investors would add real value to Nikola,” he said. “Several jurors gave interviews afterward and said, 'We did not believe he had any intent to harm anyone.' The portrayal of Trevor by some media…that Trevor is a financial serial killer is false. There was nothing predatory here. He wanted to be loved and praised [Tesla founder] Elon [Musk].”
During Milton's trial, senior Nikola executives testified that they warned Trevor not to tell the truth in his interviews and even held an “intervention” with him.
Mukasey also tried an emotional appeal relying on Milton's wife. Chelsea, who suffers from Lyme disease.
“She needs his warm heart as a caregiver,” Mukasey said. “With your doctor [sentencing recommendation] The letter says she needs him. His heart beats for her.”
A sobbing Milton told the judge he felt “terrible for everyone involved.” But he never apologized during a rambling statement. Instead, he spoke of the ethnic cleansing of the Cherokee Indians; the wrongful conviction of boxer Rubin “Hurricane” Carter in 1967; colors in heaven that do not exist on earth; and difficulties he encountered while serving as a Mormon missionary in South America. He concluded with: “Let me stay with my wife. Thank you, Your Honor.”
An entry in the annals of economic fraud
Milton, 41, joins the growing annals of white-collar criminals including Elizabeth Holmes, founder of the Theranos blood test scam, and Sam Bankman-Fried, founder of cryptocurrency exchange FTX. Both were convicted of misleading investors, personally reaping hundreds of millions of dollars in the process.
The government said investors lost between $660.8 million and $673.6 million by driving up Nikola's stock price after Milton appeared in hundreds of social media posts, as well as in broadcast, print and media interviews. and online media had made claims.
Milton was convicted in October 2022 of one count of securities fraud and two counts of wire fraud after a three-and-a-half week trial. He was acquitted on another count of securities fraud. He was released on a $100 million bond. Milton lost a bid for a new trial in August.
Judge Ramos rejected a plea deal between Milton and Holmes, who began serving an 11-year, nine-month prison sentence in May.
“MS. Holmes released it even though he knew it didn't work,” Ramos said. “That's not what Mr. Milton did, I think. I saw the trial. I think the jury did “You did it right. For many months you used your talents to promote the company in the wrong way.”
But he also rebuked Milton for his false statements.
“What you said was essentially false,” Ramos told Milton. “The theme of your letters was that you are a visionary and have an enthusiasm that pushes you to go above and beyond. Today you said that you never intended to harm anyone. The jury came to the opposite conclusion.”
From the beginning …
Nikola began in 2014 in the basement of Milton's home in Utah. The goal was to build a hydrogen-powered fuel cell heavy-duty truck for freight transport that emits no emissions other than water vapor. Milton showed off a prototype of the truck called the Nikola One in 2016, claiming it could operate under its own power and was not just a “pusher” concept truck.
A video of the truck posted online gave the impression that it was driving under its own power. Later investigations revealed that the truck rolled down a steep slope without traction.
That claim became the core of dozens of falsehoods alleged by Hindenburg Research in September 2020, just over three months after Nikola went public in a reverse merger with VectoIQ Acquisition Corp., a special purpose acquisition company.
The 67-page Hindenburg report came just two days after Nikola announced a production and capital cooperation with automotive giant General Motors. That deal later fell through, as did a plan to build battery-powered garbage trucks for Republic Services.
Citations, a fine and convictions
After vowing on social media to refute the claims, Milton resigned as Nikola's chief executive and gave up his seat on the board. Hindenburg's allegations prompted the U.S. Department of Justice and the Securities and Exchange Commission to open investigations and subpoena Nikola executives. The SEC fined the company $125 million in December 2021.
Milton once owned more than 25% of the company's stock. The value of his holdings rose from about $1.1 billion in March 2020 to a high of about $7.3 billion in June 2020. He has hundreds of millions of dollars worth of shares following the expiration of a six-month lock-up period three years ago -dollars sold.
Milton still owns about 8% of the company, whose shares were trading at 89 cents on Monday on the Nasdaq. On June 6, 2020, two days after the SPAC merger was completed, it closed at $79.73.
Nikola on the ropes
Nikola itself is in trouble after filing a going concern statement with the SEC in February that suggested the company might no longer be in operation in 12 months. Macroaxis, a San Francisco-based fintech company, estimates that Nikola has an 81% chance of bankruptcy.
The company lacks the money to scale the fuel cell trucks it builds at a plant in Coolidge, Arizona. After shareholder approval that doubled the number of authorized shares to 1.6 billion, Nikola quickly diluted current shareholders by selling new shares and raising money that would be repaid through shares.
The company won $165 million from Milton in an arbitration case concluded in October. The company is also seeking to recover legal fees Milton paid as part of his separation.
Nikola recalled 209 battery-electric trucks in August after several battery fires that began in June. The company has allocated $61.8 million to replace the batteries. The company has to bear these costs alone because it is the owner of the battery supplier Romeo Power.
Nikola purchased Romeo in a stock deal worth $144 million in August 2022 and liquidated the company in June of this year by selling Romeo's battery pack manufacturing assets to Mullen Automotive for $3.5 million. The company has not announced a new battery supplier for the recalled trucks that the company paid to deliver to its Arizona plant.
Editor's note: Updates with comments from Judge Ramos, Milton remains free on bail and Nikola stock price updated. Inner City Press contributed to this report.
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Fed calls for eleven-year prison sentence for Nikola founder
FBI agents explain the parallels in the Elizabeth Holmes and Trevor MIlton fraud cases
“Ambitious dreamer” Trevor Milton seeks probation instead of prison
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