(Bloomberg) — Nikola Corp. founder and former CEO Trevor Milton was sentenced to four years behind bars for lying to shareholders about the electric truck maker’s progress.
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Milton, 41, was sentenced Monday by U.S. District Judge Edgardo Ramos in Manhattan, more than a year after a jury convicted him of securities fraud and wire fraud for misrepresenting key details on the development of Nikola’s products and technology. He was also ordered to pay a $1 million fine.
Prosecutors had asked for a sentence “consistent” with the 11 years recommended by probation officials, saying a lengthy incarceration term was necessary both to punish Milton and deter other business executives from committing misconduct. similar. The government said Milton’s fraud cost investors $660 million.
Milton, in tears, had asked the judge to sentence him only to probation, saying he did not intend to mislead investors and that he made mistakes because of a lack of experience.
“I wasn’t a very experienced CEO,” he said.
Ramos allowed Milton to remain free on bail while he appealed his conviction. Milton said after the sentencing that he thought the verdict would be overturned.
The jury took just hours to convict Milton in October 2022, after a two-month trial that included testimony from more than a dozen government witnesses and evidence, including an infamous viral video that appeared to show a semi -Nikola prototype traveling under its own power. In fact, it was rolling downhill thanks to gravity.
Milton’s case was unusual among white-collar fraud cases because he was accused of making false statements through public channels like YouTube, rather than in financial statements or other company filings.
“You used your considerable social media talents to tout your business in a manner that was materially false,” Ramos said during sentencing. “What you said repeatedly in multiple media outlets was false and it was materially false. »
Defense attorney Marc Mukasey said Milton’s communications were motivated by his “true belief” in his business rather than greed. “This was not a nefarious attempt to take advantage of people,” Mukasey said. “It was not trained or intended for specific people.”
But prosecutor Matthew Podolsky said it was “irrelevant” that Milton wanted to harm investors. “At the end of the day, he didn’t care” if he did, Podolsky said.
Nikola attracted investors eager to find the next Tesla Inc. after making its market debut through a blank check merger in June 2020. For a time, Nikola had a market capitalization larger than Ford Motor Co ., giving Milton a net worth of $4 billion.
But shortly after Nikola began commercial operations, Bloomberg reported that Milton had greatly exaggerated the capabilities of one of its first prototypes, the Nikola One, describing it as a fully functional vehicle, even though the truck could not not be driven at the time due to missing parts. . Three months later, short seller Hindenburg Research released a report accusing the company of deception and lies about its technology, sending shares tumbling.
Milton resigned as executive chairman in September 2020. He was indicted by federal prosecutors the following July.
His conviction was a victory for federal prosecutors in Manhattan, who are committed to cracking down on corporate wrongdoing, and his sentencing comes just over a month after FTX co-founder Sam Bankman-Fried was found guilty of defrauding investors in the cryptocurrency exchange.
Milton previously asked Ramos to overturn his conviction, arguing that some of the judge’s instructions to the jury were erroneous and that one juror lied to get on the jury. The motion was rejected in August.
He remains Nikola’s second-largest shareholder and earlier this year called for leadership changes at the company, urging investors to reject company-backed proposals to re-elect directors and authorize the issuance of new actions.
The stock traded below $1 per share for most of April and May, raising threats of delisting. While shares rebounded to over $3 in August, they have since fallen back below $1, well below the closing peak of nearly $80 in mid-2020.
The case is US v. Milton, 21-cr-478, US District Court, Southern District of New York (Manhattan).
(Corrects prosecutor’s name in 11th paragraph and spelling of Hindenburg Research in 13th.)
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