Nikola Motors founder and former executive chairman and CEO Trevor Milton was hauled away from his vertical farm in rural Utah and into federal custody in New York today. Prosecutors say that in his former life he lied about practically everything going on at the would-be electric truck revolutionary in an indictment that reads like a slightly staid edit of short-seller Hindenburg Research’s blistering report that led to Milton becoming the former executive chairman and disrupting gentleman farmer in the first place. And boy oh boy were these (allegedly) some pretty spectacular lies.
Prosecutors allege that Milton claimed Nikola had a "fully functioning" semi-truck prototype known as the "Nikola One," when he knew that the prototype was inoperable. Strauss said the closest it ever came to operating was when it was pushed to the top of a hill then rolled down to produce a video showing it in motion.
The indictment also says Milton also claimed that the company was producing hydrogen and was doing so at a reduced cost, when he knew that in fact no hydrogen was being produced at all by Nikola, at any cost.
It all makes for a prosecutor’s best friend, “a very straightforward case,” as Manhattan U.S. Attorney Audrey Strauss put it. (Milton’s own lawyers, as you might imagine, have a somewhat different take, calling it “a new low in the government’s efforts to criminalize lawful business conduct” like allegedly rolling a truck down a hill, about which “every executive in America should be horrified.”) But gratifying as it might be, there’s an emptiness to Strauss’ words, because she clearly thinks the real villain is getting away with it, and that villain is the legal structure known as a special purpose acquisition company and its more-or-less non-existent disclosure requirements when taking companies like Nikola public via merger.
"Milton wanted to be in control and didn't want bankers telling people what his company was like," said Strauss. "Milton exploited this feature of the SPAC for his own benefit."
While SPACs are hot, it is a route the SEC is trying to curb. The commission accused Momentus and its founder of fraud and its SPAC partner of negligence for not ferreting out the problems and disclosing them in regulatory filings and investor materials.
“Those who stand to earn significant profits from a SPAC merger may conduct inadequate due diligence and mislead investors,” SEC Chairman Gary Gensler warned in announcing an enforcement action earlier this month that included a settlement order.
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