Nikola Founder Trevor Milton Charged With Securities Fraud

“In order to drive investor demand for Nikola stock, Milton lied about nearly every aspect of his business,” Manhattan U.S. Attorney

Audrey Strauss

said at a news conference Thursday.

The Securities and Exchange Commission also filed a civil complaint Thursday against Mr. Milton.

Mr. Milton pleaded not guilty to the charges in federal court in Manhattan on Thursday and was released on $100 million bond. A spokesman for his lawyers—Brad Bondi, Marc Mukasey and Terence Healy—said Mr. Milton was innocent. “Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses,” the spokesman said.

The federal charges represent another blow for Nikola, which was once worth more than

Ford Motor Co.

but has struggled since questions about its technology and products surfaced last year.

The Phoenix-based startup was one of several transportation-focused firms to go public in 2020 through reverse-merger deals, capturing the attention of Wall Street as investor enthusiasm intensified for electric vehicles and other alternative-propulsion systems.

Mr. Milton had attracted support from some high-profile names, including former

General Motors Co.

executive

Stephen Girsky

and activist investor

Jeffrey Ubben,

and briefly struck a deal with GM that was later scrapped.

Nikola wasn’t charged. The company said that Mr. Milton hasn’t been involved in its operations or communications since his resignation. “Nikola has cooperated with the government throughout the course of its inquiry,” a company statement said. “We remain committed to our previously announced milestones and timelines and are focused on delivering Nikola Tre battery-electric trucks later this year from the company’s manufacturing facilities.”

Nikola’s stock was down roughly 8% in morning trading.

The federal charges are the latest and most extreme example of the challenges other transportation startups have confronted in recent months, following well-received debuts on Wall Street that initially sent their stock soaring.

Electric-truck upstart

Lordstown Motors Corp.

, which listed last fall through a SPAC merger deal, has also drawn the scrutiny of federal investigators. Earlier this month, it confirmed the Justice Department is probing its business, investigating matters related to its reverse merger deal and preorders for its forthcoming pickup truck, the Endurance.

The U.S. Securities and Exchange Commission is also investigating Lordstown, the company has disclosed.

Mr. Milton, a self-described serial entrepreneur, founded Nikola in 2015 with the ambition of disrupting the commercial-trucking industry by selling and leasing big, semi-trucks powered by batteries and hydrogen fuel. He was known for making bold statements and displaying a charisma that helped inspire employees and attract investors.

Mr. Milton pitched the company on social media, television and podcasts to small investors who poured in when it went public with a special-purpose acquisition company, or SPAC. The indictment noted that, unlike when shares are first issued through an IPO, executives after a SPAC merger aren’t limited in their ability to speak about a company.

Mr. Milton explained on a podcast that an advantage of a SPAC was that he could communicate with the market, Ms. Strauss said. She said he exploited this feature of a SPAC, driving retail investors to buy his company’s stock.

Prosecutors said some of Mr. Milton’s claims were false and from November 2019 to September 2020, amounted to a scheme to defraud individual, nonprofessional investors.

Mr. Milton’s scheme was motivated by wealth and fame, prosecutors said. As Nikola’s stock price went up, Mr. Milton’s shares were once worth at least $8.5 billion, prosecutors said, noting that he aspired to be featured on Forbes’s list of America’s richest people.

Mr. Milton’s false statements included those about Nikola One, a semi-truck prototype, the indictment said.

To create one video detailed in the indictment, Mr. Milton directed a Nikola employee to use footage of a Nikola One—which wasn’t safe and had no batteries—rolling down a hill, prosecutors said. In the video, which appeared on social media, the truck appears to be driving without an incline, according to the indictment.

Mr. Milton also misled investors about an electric- and hydrogen-powered pickup truck known as the Badger, the indictment said. The Nikola founder also lied about reservations for future delivery of the semi-trucks, saying they were binding orders that represented billions in revenue, according to the indictment. Prosecutors said that in reality, most of the orders could be canceled at any time.

In September, Nikola was rocked by claims raised in a report by New York-based short seller Hindenburg Research. The report accused Nikola and Mr. Milton of making deceitful statements and exaggerating the progress on some of its key technology, including on hydrogen-powered semi trucks.

Nikola’s share price slid after the report. Prosecutors said some individual investors lost hundreds of thousands of dollars on the company.

The company said an internal review found that the Nikola One video gave a misleading impression it was drivable and that Mr. Milton had made several inaccurate statements. In particular, the company said that it found nine statements by the company or Mr. Milton were wholly or partially inaccurate.

Nikola didn’t directly address other allegations in the short seller’s report other than to say: “In other respects, the Hindenburg article’s statements about the company were inaccurate.”

Mr. Milton—who still has a roughly 20% stake in Nikola, according to FactSet—had built several businesses before Nikola that had often ended up in disputes, litigation and disappointed investors.

He was able to convince several major finance and auto-industry figures to help him build Nikola, including Mr. Ubben, the founder of San Francisco-based ValueAct Capital Management LP, who is still on Nikola’s board. Mr. Ubben, who couldn’t immediately be reached, told Bloomberg last year that the company went public too early.

General Motors Co. had also briefly struck a deal with Nikola to help it develop and manufacture new models, a move that had at the time sent stock in both companies surging. In exchange for its services, GM said it would receive an 11% stake in Nikola, a would-be rival for electrified pickups.

GM later pulled out of the equity deal and instead revealed a stripped-down agreement, saying it intends to provide Nikola with fuel-cell technology. A GM spokesman declined to comment on the charges against Mr. Milton.

When Mr. Milton stepped down in September, Nikola appointed board member Mr. Girsky as executive chairman. Mr. Girsky, a former GM executive, introduced Mr. Milton to GM Chief Executive

Mary Barra,

opening the discussions that led to the original deal.

Mr. Girsky declined to comment on the charges against Mr. Milton and deferred to Nikola’s statement.

Mr. Girsky joined Nikola’s board last summer, when the startup combined with a publicly traded special-purpose acquisition vehicle, VectoIQ Acquisition Corp., which he led and partly owned.

Mr. Milton also drew support from

CNH Industrial

NV and auto-supply giant Robert Bosch GmbH. Both companies declined to comment.

—Mike Colias contributed to this article.

Write to Corinne Ramey at Corinne.Ramey@wsj.com