Nikola Motors Fraud Explained

Kinnary Nensee Kinnary Nensee Apoorva Bajj Apoorva Bajj
Mar 1, 2023 5 min read
Nikola Motors Fraud Explained

A company that was founded nine years ago, in 2014, and named in the honor of Nikola Tesla, Nikola Corporation, was, ostensibly, in the business of manufacturing heavy-duty commercial battery electric vehicles, fuel cell energy vehicles, and energy solutions.

After presenting several vehicle concepts between the years 2016 and 2020, leading with a natural gas-fuelled turbine-electric semi-truck, it went public on 4th June 2020. Nikola Corporation also went ahead and delivered its first two battery-electric trucks in December 2021, known as Nikola Tre. However, by September 2021, the Securities and Exchange Commission and the Department of Justice had already launched an investigation into allegations of security fraud by its founder and former CEO Trevor Milton. It was at this time, that the unraveling began.

The Beginning & Growth
Unraveling The Fraud
How Nikola Surged Ahead
Who Is Trevor Milton

The Beginning & Growth

Trevor Milton founded Nikola Corporation in Salt Lake City, Utah in the year 2014 and announced that 5000 Nikola One hydrogen-powered glider trucks would be built by 2016. They were to be built by Fitzgerald Glider Kits in Tennessee. By the year 2019, Nikola had acquired 389 acres of land in Coolidge, Arizona for a total of USD 23 million. The company announced that the factory construction work was slotted to begin by 2020, truck construction a year later, in 2021, and by 2023, Nikola would be fabricating 35000 to 50000 trucks per year.

By March 2020, Nikola Corporation and VectoIQ Acquisition Corporation, announced a merger that resulted in the combined company, NKLA, being listed on the NASDAQ exchange. The Nikola stock began trading on 4th June 2020, a day after the merger was officially completed. Within the space of one week, Nikola shares doubled as the investor's interest heightened leading to a continuation of betting on the growing potential of electric transport. This was followed by the company beginning to take order reservations for the truck, even though customers had as yet not even seen a prototype.

The growth continued and by August 2020, Nikola Corporation reached a valuation of USD 13 billion. On September 8, 2020, Nikola Corporation entered into another strategic partnership with GM (General Motors). The partnership stated that GM would acquire an 11% stake in Nikola and also nominate one member to Nikola’s board. Consequently, GM would also begin the production of Badger and supply fuel cells and batteries to Nikola, globally. Unsurprisingly, this resulted in Nikola’s stock increased by 50% as the announcement was received with enthusiasm.

Unraveling The Fraud

It all began with the short-seller firm, Hindenburg Research releasing a report on 10th September 2020 that outright accused the company’s founder Trevor Milton of perpetrating ‘an intricate fraud’. Trouble mounted when this report was confirmed by Financial Times and Research Enquirer that showed a Nikola One rolling down a slope using the natural force of gravity instead of onboard propulsion. In response to these claims, Nikola stock fell by 10% and the GM stock took a hit of 4%. Within a couple of days, by September 12th, Nikola stock witnessed a sharp drop of 36%.

As outraged as Nikola was with these claims and threatening legal action against Hindenburg, its troubles were far from over. These claims had interested the US Attorney’s Office for the Southern District of New York. September 14th saw reports stating that the Securities and Exchange Commission had begun investigating allegations of fraud against Nikola Corporation, followed by the Department of Justice beginning its investigations a day later.

Within a week, by September 21, Trevor Milton resigned from his designations as Executive Chairman and Founder while the share price of Nikola continued to drop surrounded by news of the allegations. This was quickly followed by unraveling partnerships and further share price fall.

Nikola Motors Fraud

BP (British Petroleum Company PLC) canceled a potential partnership that would have developed hydrogen refueling stations for Nikola’s EV trucks. November 2020 saw GM backing away from the proposed deal to buy an equity stake in Nikola Corporation as well as canceling the production of the Badger electric pick-up truck. A month later, another announced partnership with Republic Services was terminated. This partnership was in formation to jointly develop zero-emissions garbage trucks.

How Nikola Surged Ahead

By February 2021, Nikola rallied a little and publicly canceled Powersports unit and its plans to produce them. However, they stated that by the fourth quarter of the year, their intention was to produce between 50 and 100 Nikola Tre Vehicles. In June of the same year, Nikola Corporation invested USD 50 million in a new hydrogen factory to produce fuel for semi-truck fuel stations. The effort was to be spearheaded by Wabash Valley Resources. A month later, by July there was an announcement to add five new class 8 truck dealers in Arizona, Texas, Colorado, California, New Mexico, Delaware, Florida, Maryland, and Virginia.

Who Is Trevor Milton

Trevor Milton - Founder Nikola Motors

Trevor Milton was born in Utah and is one of five siblings. He pursued a career in sales and marketing after opting to drop out of Utah Valley University. Milton’s career included various businesses that began with his first venture, an alarm sales company called St. George Security and Alarm. He exited the business for USD 300,000. He immediately launched an online classified advertisement website that sold used cars. However, the company failed and eventually closed. He launched dHybrid Inc., which was in the business of retrofitting commercial trucks with engines that could run on natural gas. It ran into trouble with an investor that resulted in the company closing down. He then launched dHybrid Systems which, according to his claim, was purchased by Worthington Industries. It was after this, that Milton founded Nikola.

Following the allegations and investigations into him, Milton surrendered himself and pled not guilty to all charges leveled against him. However, in June 2022, Milton was charged with additional wire fraud, and by October 2022, was found guilty of one count of securities fraud and two counts of wire fraud.


In July 2021, when Trevor Milton was indicted, Nikola Corporation said – “We remain committed to our previously announced milestones and timelines are focused on delivering Nicola Tre-battery electric trucks later this year from the company’s manufacturing facilities.”

A little over a year later, by August 2022, Nikola announced the acquisition of the battery company, Romeo Power. The process was completed by October 2022. It remains to be seen how the company executes the upcoming opportunities.


What is the Nikola Motors fraud scandal?

The Nikola Motors fraud scandal involves accusations that the electric truck maker, Nikola Corporation, misled investors and the public about its technological capabilities, and achievements. Nikola denied the allegations and launched its own investigation.

What was the role of founder Trevor Milton in the fraud scandal?

Founder Trevor Milton was accused of making false statements to investors in the Nikola Motors fraud scandal. He resigned after the allegations emerged.

What actions did Nikola Motors take to address the fraud allegations?

After the fraud allegations were made, the company denied the accusations and launched its own investigation into the matter. The company's Board of Directors formed a special committee to oversee the investigation.

What is the impact of the fraud allegations on Nikola Motors' stock prices?

The fraud allegations caused a significant drop in Nikola Motors' stock price. While the stock price has since recovered somewhat, it remains below its peak levels from earlier in 2020.

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