Founder of Nikola Corp. Trevor Milton was convicted of fraud for misleading investors electric truck company, a stunning failure for the door-to-door salesman-turned-billionaire who promised to revolutionize the auto industry.

Milton, 40, was convicted by a federal jury in Manhattan on Friday of one count of securities fraud and two counts of wire fraud, aiding the Justice Department’s crackdown on corporate crime. He faces many years of imprisonment.

It’s been a wild ride for the charismatic entrepreneur, whose fortune has dwindled into the hundreds of millions since Nikola’s stock surged when the company floated its stock in June 2020. Milton, who remains the company’s largest individual shareholder, founded Nikola in 2014 and built it into a company valued at $34 billion when it went public, more than Ford at one point Motor Co.

The rapid growth of the startup, which at the time had no profit, happened against the background of a wave electric car companies go public through special purpose acquisition companies, or SPACs, starting two years ago as investors searched the landscape for the next Tesla. Going the SPAC route allowed them to sell their companies based on future performance projections rather than actual financial results. Some of the biggest names on Wall Street have poured money into the sector.

Celebrity endorsement

After Nicola’s listing, ordinary investors also began to pay attention to Milton’s vision, and the company became a lot of discussion on the Internet. Elon Muskwas While Nicola initially focused on the heavy commercial trucks, it branched out into sports and consumer electric vehicles. All this was complemented by celebrity endorsements such as Heavy D of the Diesel brothers, who promoted the Badger pickup truck, a product that never made it to the visualization stage.

Prosecutors alleged that Milton encouraged retail investors to buy Nikola stock by making false claims about the company’s products and capabilities in numerous podcast and television interviews, grossly exaggerating Nikola’s ability to produce trucks powered by hydrogen fuel cells as well as its ability to produce its own fuel.

It was “lie after lie after lie,” Assistant U.S. Attorney Jordan Estes told jurors in his closing arguments Thursday. “His lie may have been on social media, but make no mistake: it was an old-fashioned scam.”

Milton’s lawyers called the case “prosecution by misrepresentation,” arguing that their client never intended to mislead potential investors and that, in any event, his statements were not material or important enough to influence those investors’ decisions.

Milton was generally in good spirits as he arrived at court in a suit and tie to sit with his lawyers. At times there were dozens of people in the courtroom, and his family and friends occupied the first two rows at the defense table.

In his closing statement, which brought Milton’s wife to tears, defense attorney Mark Mukasey asked jurors to “imagine what a nightmare it must be for Trevor at 40 years old to have his life hanging in the balance” because of an overzealous prosecution.

There were brighter moments. Mukasey took a few practice swings with a phantom putter during a busy call during Friday’s jury trial.

During the trial, which began with opening statements on September 13, the government called a dozen witnesses. It all started with Paul Lackey, a former Nikola contractor whose fraud allegations helped spur the criminal investigation.

Lackey, an engineer at electric drive systems company EVDrive, said he gave information to Nate Anderson’s Hindenburg Research in exchange for a share of the company’s profits. A September 2020 short-seller report called Nikola a “convoluted fraud” that, among other allegations, overstated the capabilities of its earliest test trucks. Nicola’s shares fell.

The government called other Nicola insiders to the witness stand. Among them:

  • Brendan Babiars, a former designer at Nikola, who said the prototype of the planned electric car startup Badger pickup truck was made partly of components from a Ford F-150 Raptor
  • Chief Executive Mark Russell, who said he only learned after joining the company that its debut electric truck had neither a natural gas turbine nor a fuel cell when Milton introduced it
  • CFO Kim Brady said Milton was so “hyper-focused” on the company’s share price that when the stock fell $5 on its first day of trading, he thought something was wrong with the Nasdaq

The defense called Harvard Law School professor Allen Ferrell, an economics expert Stock exchangewho told jurors that traders largely shrugged off statements Milton made between when his company went public and before he resigned.

The case is United States v. Milton, 21-cr-478, United States District Court, Southern District of New York (Manhattan).