The disgraced founder and former CEO of the “zero emissions” truck company Nikola, Trevor Milton, was sentenced to four years in prison on Monday, Bloomberg reported.
That’s a lighter sentence than prosecutors had requested after a jury found Milton guilty of one count of securities fraud and two counts of wire fraud in 2022. During the trial, Milton was accused of lying about “nearly all aspects of the business,” CNBC reported.
From 2016 to 2020, Milton’s “extravagant claims” were fueled by a desire to pump up the value of Nikola stock, The New York Times reported. He was accused of misleading investors about everything from fake prototypes of emission-free long-haul trucks to billions worth of supposedly binding orders for hydrogen fuel cells and batteries that were never shipped. In a sentencing memo, prosecutors said that Milton targeted “less sophisticated investors,” the Times reported, engaging “in a sustained scheme to take advantage of” their inexperience.
Nikola’s stock peaked in 2020, but then dozens of fraud allegations were reported by the investment firm Hindenburg Research, causing Nikola stock to plummet promptly. “We have never seen this level of deception at a public company, especially of this size,” Hindenburg Research’s report said. Facing backlash, Milton resigned, voluntarily withdrawing from his company and selling off $100 million in Nikola stock to fund more than $85 million in luxury purchases, the Times reported. Today, Milton remains Nikola’s second-largest shareholder, Bloomberg reported.
By 2021, Nikola had admitted to the US Securities and Exchange Commission that nine statements made by Milton were “inaccurate.”
The price of these lies to investors was more than $660 million, prosecutors claimed.
Through it all, Milton has denied the charges, requesting to be sentenced to only probation while holding back tears, Bloomberg reported. At his sentencing hearing, he said that his “misstatements” came from a place of “deeply held optimism,” and he did not intend to cause any harm, Yahoo reported.
“I was not a very seasoned CEO,” Milton reportedly said.
Prosecutors sought heavier consequences, asking the judge to order Milton to pay a $5 million fine and sentence Milton to 11 years in prison.
Milton is likely to appeal, Bloomberg reported.
Nikola’s spokesperson provided Ars with a statement on the sentencing.
“Nikola has a strong foundation and is in the process of achieving our mission to decarbonize the trucking industry, which is our focus,” Nikola’s statement said. “We have made significant progress year-over-year and will continue with the same level of discipline and commitment in 2024. We are pleased to move forward and remind the public that the company founder has not had any active role in Nikola since September 2020.”
Nikola’s shaky road to recovery
Current Nikola CEO Steve Girsky has recently said that Nikola will recover by attracting “world-class people to execute on our business plan” and working toward “establishing ourselves as the leader in zero-emissions commercial transportation,” Forbes reported.
Girsky seems keen to move past the scandal by promoting Nikola’s latest successes. In September, Girsky boasted that daily tests showed that one of Nikola’s fuel cell trucks could successfully run for 900 miles.
“This was quite an accomplishment, and I defy anyone to find another zero-emission vehicle truck anywhere that can run up to 900 miles in a day,” Girsky said.
However, since the 2020 scandal, Nikola’s stock has dropped 99 percent, Forbes reported, and now an investor analytics company called Macroaxis has estimated that Nikola has an 81 percent chance of going bankrupt.
While Forbes credited Milton with most of Nikola’s current woes, it’s not just the scandal causing investment setbacks for Nikola. In August, Nikola also recalled most of its battery-electric trucks—about 209—after a fire probe revealed a “defective part” that “is believed to have caused a battery to overheat” and risk setting trucks on fire, The Wall Street Journal reported.
This represented “virtually all” the battery-electric trucks that Nikola had shipped to customers, the Journal reported. While engineers worked on a solution to keep battery-electric trucks on the roads, Nikola temporarily halted sales of the battery-electric trucks, ramping up production instead on hydrogen fuel-cell electric trucks that remain Nikola’s core focus.
In September, Girsky described the recall as a setback but pointed to all of Nikola’s progress since Milton’s departure.
“It’s a setback, but we’re in it for the long haul,” Girsky said. “We’ve proved the skeptics wrong who said we couldn’t engineer a truck, couldn’t build a truck, and couldn’t sell a truck, and we’re not planning on stopping any time soon.”