Nicholas Trevor Melton founder pleads not guilty to fraud charges

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Trevor Melton, founder of Nikola Inc., exits federal court in New York, US, on Thursday, July 29, 2021.

Angus Mordaunt | Bloomberg | Getty Images

Founder Nicola Trevor Melton pleaded not guilty to fraud charges in a Manhattan courtroom Thursday afternoon after federal prosecutors accused him of misleading investors about the capabilities and technologies of an electric car start-up.

Mitton, who resigned as chairman in September, was released on $100 million in bonds secured against two of his $40 million Utah properties. He was prevented from contacting the investors and the court issued travel restrictions. It was his first major appearance since he resigned from the company and deleted his social media accounts.

A federal grand jury has indicted Milton on three counts of criminal fraud for lying about “nearly every aspect of the business” to boost stock sales for the electric car startup, according to the indictment unsealed Thursday.

Milton’s lawyers vigorously defended his innocence.

His legal team, led by Brad Bundy, said Milton was “wrongly charged after a false and incompetent investigation,” and that justice will not be served until he is acquitted, according to an emailed statement Thursday.

Read the full statement from Milton’s legal team:

Trevor Melton is innocent. This is the new decline in government efforts to criminalize legal business behaviour. Every executive in America should be terrified.

Trevor Melton is an entrepreneur with a long-term vision to help the environment by reducing carbon emissions in the trucking industry.

Mr. Milton has been wrongly accused after a faulty and incomplete investigation in which the government ignored crucial evidence and failed to interview important witnesses.

From the start, this was a research investigation into a crime. Justice is not served by government action today, but it will be when Mr. Milton is acquitted.

John Coffey, a professor of securities law at Columbia University, said it would likely be in Milton’s best interest to seek an objection deal. He said the allegations made by federal prosecutors “are not accurate allegations for which there can be a reasonable argument.”

In an email to CNBC, he said: “If he is rational, Mr. Milton should seek a plea bargain.

Milton is accused of two counts of securities fraud and one fraud. Securities fraud charges carry maximum penalties of 20 and 25 years in prison, respectively. The charge of telegraph fraud carries a maximum penalty of 20 years in prison.

The grand jury said Milton should relinquish all property “attributable to the commission of the said crimes,” which would likely include more than $1 billion he acquired when Nicolas announced it in June 2020.

Nikola’s stock was down 15.2% to $12.03 per share Thursday. That’s a sharp drop from its all-time high of $93.99 on June 9, 2020, days after the company went public.

The Securities and Exchange Commission also filed civil securities fraud charges against Milton on Thursday. The Securities and Exchange Commission asked the US District Court for the Southern District of New York to permanently ban him from serving as an officer in a company that issues securities, to get rid of all illicit gains and pay a fine.

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