Former Nikola (NKLA) CEO Trevor Milton was sentenced to four years in federal prison on Monday, a ruling that came 14 months after he was convicted by a jury of spreading lies about the hydrogen-electric vehicle company he founded.
Milton’s attorney asked US District Judge Edgardo Ramos, who presided over the case, to sentence him to no jail time. During a tearful statement in court, Milton reportedly said he didn’t dispute his verdict but did not commit “those crimes.”
The sentencing is less than what prosecutors wanted. They asked for a sentence of 11 years in federal prison, less than the maximum allowable sentence of 60 years.
In a court document filed prior to Monday’s hearing, Justice Department prosecutors said that an 11-year sentence would be similar to the sentence handed down last year to blood-testing startup Theranos’ founder and CEO Elizabeth Holmes, who was also convicted of securities fraud.
“Just as Holmes lied about Theranos-manufactured blood analyzers, Milton lied about the operability of the Nikola One semitruck,” prosecutors wrote in a document prior to the sentencing hearing.
Nikola’s stock fell after news of Milton’s sentencing and ended the day down more than 9%.
Nikola, founded in 2015, leapt on to the electric vehicle scene in 2020 as the company went public and Milton promoted its plans to manufacture electric- and hydrogen-powered semi and pickup trucks, as well as a network of hydrogen fuel stations.
The truck maker made its public debut on June 4, 2020, through a merger with VectoIQ Acquisition Corp (VTIQ), a special acquisition company formed by former General Motors (GM) employees.
Days after the IPO Milton told Yahoo Finance that Nikola expected its first electric-powered semitrucks to be on the market in 2021 and its hydrogen-powered options to hit the market in 2023.
“My goal is to take the throne from the Ford F-150,” Milton told Yahoo Finance.
Months later, Nikola came under scrutiny when short seller Hindenburg Research alleged that Milton committed securities fraud by spinning up an “ocean of lies” to deceive investors.
Hindenburg said Nikola released a deceptive video making it seem as if its “Nikola One” semitruck was traveling under its own power at a high rate of speed when, in fact, it was just rolling down a hill.
Milton stepped down as executive chairman and board member of his company following Hindenburg’s claims. In court on Monday he reportedly told the judge that he stepped down because his wife was ill, not because he committed fraud.
The claim from Hindenburg, however, led to investigations and then charges by the US Justice Department and US Securities and Exchange Commission.
At trial, prosecutors alleged that along with with false representations concerning Nikola’s hydrogen fuel cell prototype truck, Milton made false public statements promoting it as a real, “fully functioning vehicle.”
Jurors agreed that Milton’s video falsely made it appear as if the truck could drive on its own propulsion, and that Milton lied about the existence of hydrogen fuel manufacturing and fueling facilities.
They also found that he deceived investors about the costs of hydrogen production and made false statements about its pickup truck, truck orders, and battery technology.
In October 2022 a Manhattan jury returned guilty verdicts against Milton on three of four criminal counts of fraud brought by the Justice Department. The charges included two counts of wire fraud and two counts of securities fraud. The jury said Milton was not guilty of one of the securities fraud charges.
During Monday’s hearing government lawyers and lawyers for Milton argued over the extent of loss sustained by Nikola investors, Inner City Press reported.
Probation officials responsible for recommending Milton’s penalties estimated in a report that Milton caused $125 million in losses. Prosecutors alleged those losses were between $661 million and $674 million. Milton’s lawyers argued a loss amount of $0.
The judge ultimately ruled that Milton would be sentenced to four years in prison on each of his three convictions, with each sentence to run concurrently.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
