- By Natalie Sherman
- Business reporter, New York
The founder of an electric truck start-up that was popular in the US has been sentenced to four years in prison.
Trevor Milton, who led Nikola Corporation, was convicted of fraud last year after a jury found he had lied persistently about the company.
His claims helped pump up the firm’s share price, which soared to astonishing heights during the pandemic before crashing due to fraud claims.
The 41-year-old wept at the sentencing hearing, maintaining he meant well.
“Today’s sentence should be a warning to start-up founders and corporate executives everywhere — ‘fake it till you make it’ is not an excuse for fraud, and if you mislead your investors, you will pay a stiff price,” said Damian Williams, US Attorney for the Southern District of New York.
Milton, who did not have degree, founded Nikola around 2015 and pitched it as a potential rival to Tesla.
It claimed to be designing trucks powered by electricity and hydrogen. In June 2020, Nikola became a public company after it merged with another firm.
Within weeks, it was valued at more than $20bn – despite never having delivered a single vehicle – and was soon announcing partnerships with the likes of General Motors.
But the hype collapsed as questions grew about the truth of Milton’s statements. A well-publicised report from short-seller Hindenburg Research contributed to the growing concerns.
The investigation by federal prosecutors found that Milton had “made false claims regarding nearly all aspects of Nikola’s business” and specifically targeted non-professional investors.
“Over the course of many months, you used your considerable social media skills to tout your company in ways that were materially false,” said Judge Edgardo Ramos.
“What you said over and over on different media outlets was wrong,” the judge added.
In one example, a promotional video that appeared to show the truck running on its own power, was actually rolling downhill.
The sentencing comes two years after Nikola paid $125m to resolve fraud claims brought by financial regulators.
The sentence delivers far less prison time than Milton could have received, given the hundreds of millions of losses described by prosecutors.
He was also sentenced to three years of supervised release, ordered to forfeit property, and was required to pay a fine of $1 million.
He is the latest American entrepreneur to end up behind bars.
Theranos founder Elizabeth Holmes is also currently serving time in prison while FTX boss Sam Bankman-Fried is awaiting sentencing.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.