Risk & Compliance

Nikola Fined $125M for Investor Fraud

The SEC says the electric vehicle maker misled investors about key aspects of its business, including its technology and a partnership with General...
Matthew HellerDecember 21, 2021

Electric vehicle maker Nikola has agreed to pay $125 million to settle charges that it misled investors about key aspects of its business, including its technology and a partnership with General Motors.

The settlement with the U.S. Securities and Exchange Commission came five months after Nikola’s founder and former CEO, Trevor Milton, was charged with securities fraud for misrepresenting the company’s business prospects to inflate its share price.

The SEC said Nikola was not only at fault for Milton’s alleged misconduct but also for making “other material misrepresentations” to investors about, among other things, the refueling capabilities of its hydrogen fuel cell trucks.

While Nikola told investors the refueling time was 10 to 15 minutes, the actual time was 45 to 80 minutes, the SEC said in an administrative order.

To settle the charges, Nikola agreed to pay a $125 million civil penalty.

“As the order finds, Nikola Corporation is responsible both for Milton’s allegedly misleading statements and for other alleged deceptions, all of which falsely portrayed the true state of the company’s business and technology,” Gurbir Grewal, director of the SEC’s division of enforcement, said in a news release.

Nikola disclosed in November 2020 that it was under investigation by federal and state authorities. The vehicle maker had been under scrutiny since a short-seller released a report that described it as an “intricate fraud built on dozens of lies” by Milton.

Hindenburg Research released its report two days after Nikola announced a strategic partnership with GM to produce the Badger electric pickup truck.

The SEC said Nikola misrepresented the benefits of the GM alliance by touting potential cost savings of $5 billion over 10 years when its own “internal projections showed that the entire Badger program could potentially generate a net loss of $3.1 billion over six years and threaten Nikola’s solvency.”

The commission also faulted Nikola for stating that a demonstration station at its headquarters was “a model for future hydrogen stations,” saying the statement “was misleading because Nikola failed to disclose that this station was beset by significant operational and repair challenges.”