Trevor Milton, the founder of electric and hydrogen-powered truck manufacturer Nikola (NASDAQ: NKLA), has been sentenced to four years in prison after being found guilty of deceiving investors about the company’s technological capabilities.
The conviction, handed down by a jury in October 2022, focused on Milton’s false claims that Nikola had independently developed a pickup truck and batteries, along with misleading statements about the functionality of their “Nikola One” semi-truck.
During the sentencing in federal court in Manhattan, US District Judge Edgar Ramos affirmed the jury’s verdict, stating that Milton was aware of the falsehoods he propagated.
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Federal prosecutors recommended an 11-year prison term, drawing comparisons to the case of Elizabeth Holmes, founder of Theranos. However, the judge highlighted distinctions, noting that Theranos’ faulty technology had tangible health consequences. And unlike Holmes Milton was allowed to remain free on bail pending his appeal.
“There has to be a message that whether you are an entrepreneur, a startup founder, a corporate executive, when you go out there and talk about your company, you must be honest,” said prosecutor Matthew Podolsky before the sentence was handed down.
“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,” US Attorney Damian Williams said in a statement.
Milton’s defense argued for probation, attributing any misinformation to his optimistic beliefs in the company’s potential. Speaking before the sentencing, he talked about his rural upbringing, and how a probation would allow him to support his wife’s recovery from illness. He also quoted bible verses, and insisted he did not intend to harm anyone.
However, Ramos rejected the argument that Milton’s enthusiasm excused the deception, stating that good intentions do not absolve legal responsibility.
“The law does not grant a pass for good intentions,” he said.
Milton was convicted on one count of securities fraud and two counts of wire fraud but acquitted on an additional securities fraud charge. Nikola, facing its own legal challenges, settled with the US Securities and Exchange Commission in 2021 for $125 million.
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