Prosecutors said Nikola electric truck models were powered by hidden wall plugs, towed into position and rolled down hills.

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Federal prosecutors announced Thursday that the founder of electric truck maker NKLA, with -9.13%, has been accused of lying to investors about the company’s supposed technological breakthroughs in order to drive up its stock price.

Trevor Melton, 39, is accused of claiming that his company succeeded in making working prototypes of electric trucks and vans that would turn the industry on its head, when he hadn’t actually made anything.

“Back down, this is a very simple case: Milton has told lies to generate popular demand for his shares,” said Audrey Strauss, US Attorney for the Southern District of New York.

“On public occasions, prototype cars were pulled into place and powered by plugs from hidden wall sockets.”

Melton resigned from Nicola in September as it emerged that the Department of Justice had opened an investigation into the startup and its founder over possible false allegations. Milton previously wrote on Twitter that he intends to defend himself against “false allegations”.

Prosecutors said Milton was arrested Thursday in Manhattan. It cannot be immediately reached for comment. Nicola said in a statement that the indictment was against Milton, not the company, and noted that he had not been involved with the company since last year.

Nicolas has cooperated with the government throughout the investigation. We remain committed to previously announced milestones and schedules and are focused on delivering Nikola Tre battery-powered trucks later this year from the company’s manufacturing facilities.”

In the indictment, federal prosecutors said Milton over the years exaggerated the company’s technological advances, claiming that it built prototypes of its Nikola One truck and Badger pickup truck from parts the company made entirely on its own.

“In order for the prototype truck to appear to be driving, it was towed to the top of a hill and then rolled downhill,” prosecutors said. ”

Prosecutors said, in fact, that the unveiled prototypes didn’t work and the Frankenstein monsters were stacked together from parts from other vehicles. On public occasions, vehicles were pulled into place and powered by plugs leading from hidden wall sockets.

Prosecutors said that in one case, in which the vehicle was filmed for a promotional film, tape was used to prevent the doors of a truck prototype from opening. To show that the truck was traveling, it was towed up a hill and then rolled down, according to the indictment.

It is alleged that Milton has repeatedly said publicly that the prototypes were fully functional and exaggerated the number of pre-orders the company received.

unconventional underwriting

In June 2020, the company went public via a blank checking company, or SPAC, called VectoIQ Acquisiton. Because the company didn’t go for a traditional public offering, the plaintiffs said, Melton was not bound by the provisions of the traditional “quiet period” that followed the listing, and was able to make outlandish public claims on social media about the company’s success in order to drive up the stock price by attracting retail investors.

“Among the retail investors who eventually invested in Nikola, there were investors with no prior stock market experience who started trading during the COVID-19 pandemic to replace or supplement lost income or to occupy their time during the shutdown,” the indictment reads. .

Prosecutors said in the first period after Nikola started public trading, the value of Milton’s shares rose by $7 billion. Prosecutors said that after it emerged that the company was under investigation, the shares plunged causing many retail investors to lose tens and even hundreds of thousands of dollars. In some cases, they said, some investors have lost large portions of their retirement savings.

The Securities and Exchange Commission files a parallel civil complaint. “After choosing to promote Nicolas via social media, Milton was obligated under securities laws to communicate fully, accurately and honestly,” Gurbert Grewal, director of the SEC’s enforcement division, said in a Thursday statement. “This obligation exists for all public company officials, even those whose companies have recently entered public markets through SPAC transactions.”

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