Ex-Nikola Chairman Indicted For Securities Fraud – Corporate/Commercial Law

United States:

Ex-Nikola chairman charged with securities fraud

August 31, 2021

Proskauer Rose LLP

To print this article, all you need to do is register or log in to Mondaq.com.

In April 2021, the SEC released several public statements that may have started to cool an overheated SPAC market. FINRA soon followed suit, announcing a regulatory measure targeting SPACs in July 2021. This is the first time that criminal proceedings have been filed in connection with a company that came onto the market as part of the SPAC explosion in 2020.

As the “new” and “exciting” vehicle for companies going public, several SPACs have attracted companies with their own new and exciting vehicles: electric cars or “EVs”. One of the hottest EV companies in recent times has been Nikola Corporation. Founded by Trevor Milton, Nikola sponsored zero-emission semi-trailers and pickup trucks that run on hydrogen fuel cells, which require special charging stations that produce hydrogen on-site for refueling cars and trucks. Milton often promoted Nikola and his prospects on social and senior media. At the height of the SPAC boom, Nikola announced its intention to go public through a SPAC called VectoIQ Acquisition Corporation in March 2020 and actually went public three months later with a valuation of several billion dollars. On September 8, 2020, Nikola announced a partnership with General Motors in which GM bought $ 2 billion in Nikola shares.

Shortly after that announcement, Hindenburg Research (a short seller) with the ominous name published on the 10th, “The report explicitly claimed that Nikola’s statements about his in-house technology and access to hydrogen were exaggerations or plain lies. Shortly after this report was issued, Milton stepped up of Nikola. Later that month, Milton and other senior Nikola officials received subpoenas from the SEC and the US District Attorney’s Office for the Southern District of New York and the NY County Attorney’s Office.

In November 2020, GM announced that its planned stake in Nikola would no longer take place, but that GM would continue to work with Nikola on fuel cell technology. After Nikola traded above $ 50 / share in September 2020, Nikola spent most of the last twelve months trading below $ 20 / share. In February 2021, Nikola filed his annual 10-K filing admitting that Milton had made at least nine statements that were “wholly or partially inaccurate when made”.

On July 29, 2021, the U.S. Attorney’s Office for the southern borough of New York issued a 48-page indictment against Milton, indicting him on two counts of securities fraud and one case of wire fraud. According to the Justice Department, “Milton attempted to fraudulently mislead private and other investors into buying Nikolas stock by making false and misleading statements about Nikolas products and milestones on social media, television and podcast interviews.” . Among the misleading claims, prosecutors allege that Milton made false claims about the company’s tractor-trailer and pickup trucks, its ability to produce hydrogen to fuel its vehicles, its internal technology development, and the nature of its future delivery of reserved vehicles. Through his defense attorney, Milton has denied these allegations and expressed his intention to oppose the indictment.

It remains to be seen what role, if any, Nikolas transaction with VectoIQ will play in the criminal proceedings or whether behavior by the SPAC is involved. We will follow up this litigation and will keep you informed.

Ex-Nikola chairman charged with securities fraud

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

POPULAR ARTICLES ON: United States Corporate / Commercial Law

How do companies deal with climate disclosure?

Cooley LLP

What are the greenhouse gas emissions for a megaroll of Charmin Ultra Soft toilet paper? If you guess 771 grams, you are correct … or at least consistently according to this article in the WSJ …