Electric-Vehicle Startup Nikola Settles With U.S. for $125M Over Investor Fraud Charges

Nikola Corp. has reached a settlement with the Securities and Exchange Commission that will see the company pay $125 million over charges that it defrauded investors.

The SEC said Tuesday that the American startup, which focuses on manufacturing electric and hydrogen-powered trucks, breached antifraud and disclosure control provisions of federal securities laws.

"We are pleased to bring this chapter to a close as the company has now resolved all government investigations," Nikola said in a prepared statement on the settlement. We will continue to execute on our strategy and vision to deliver on our business plan."

In July, the U.S. Attorney's Office in Manhattan charged Trevor Milton, the founder of Nikola, with two counts of securities and wire fraud. He pleaded not guilty to the charges and was released on $100 million bail. Milton also left his role as chairman of the company in September.

Milton misled investors about Nikola's products, technical advances and financial prospects, the SEC alleged, adding that he also carried out a campaign to boost the company's stock price before it had ever manufactured a vehicle.

"As alleged, Trevor Milton brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola's trucks and technology," said Manhattan U.S. Attorney Audrey Strauss in a July 29 press statement announcing the charges. "But today's criminal charges against Milton are where the rubber meets the road, and he now will be held accountable for his allegedly false and misleading statements to investors."

Nikola Settlement
Electric and hydrogen-powered truck startup Nikola has agreed to pay $125 million to settle charges that it defrauded investors by misleading them about its products, technical advancements, and commercial prospects. Above, Nikola founder Trevor Milton leaves a federal courthouse in New York, July 29, 2021. Craig Ruttle/AP Photo

Nikola also went public through something called a special purpose acquisitions company, or SPAC, a vehicle that is getting increased scrutiny from the SEC and other regulators. The SEC issued new accounting guidance for SPACs this year after a flurry of them hit the market.

SPACs, essentially a blank-check company, are used as a shortcut to go public, bypassing the lengthy and costly process of a traditional initial public offering.

SPACs exploded in popularity last year, reaching a fever pitch early in 2021 when they were raising an average of $6 billion every week. They offer investors a way to get into those exciting, potentially high-growth companies or companies or industries, and few sectors are as hot lately as electric vehicle makers.

Companies going the SPAC route often feel more license to highlight projections for big growth they're expecting in the future, for example. In a traditional IPO, the company is limited to highlighting its past performance, not necessarily the greatest selling point for young startups that have little to show for in sales or profits.

Nikola, based in Phoenix, didn't admit or deny the SEC's findings. The company did agree to cease and desist from future violations and to the $125 million penalty. Nikola also agreed to continue cooperating with the SEC's ongoing investigation. The order also establishes a fund to return penalty proceeds to investors that were impacted.

Shares rose more than 1 percent on Tuesday.

The Associated Press contributed to this report.

Trevor Milton Charges
Nikola Corp. has reached a settlement with the U.S. Securities and Exchange Commission that will see the company pay $125 million for charges that it defrauded investors. Audrey Strauss, the United States Attorney for the Southern District of New York, speaks during a news conference, in New York, Thursday, July 29, 2021. Richard Drew/AP Photo