Nikola founder Trevor Milton QUITS as chairman amid claims electric truck start-up is an 'intricate fraud' that has misled investors about hydrogen-powered technology

The CEO and founder of truck start-up company Nikola has stepped down as executive chairman amid allegations that it misled investors with exaggerated claims about its technology. 

Trevor Milton announced his decision on Sunday, days after the Financial Times reported that the Justice Department will team up with the Securities and Exchange Commission to probe the business.

Milton said: 'The focus should be on the Company and its world-changing mission, not me. So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman.'

The businessman, 39, had an estimated net worth of least $3.2 billion last year, according to Forbes.

Trevor Milton the founder and CEO of truck company Nikola, has stepped down amid allegations that it misled investors with exaggerated claims about its technology

The Phoenix-based company said in a statement that it had accepted Trevor Milton's resignation and that he would be replaced by Stephen Girsky, a Nikola board member and former vice-chairman at General Motors .

Founded by Milton in 2015 to develop trucks and pick-ups powered by electric batteries or hydrogen fuel cells, Nikola has not yet built anything, but caught attention by signing strategic partnerships with such renowned groups as GM and German engineering giant Bosch.

The announcement of the GM partnership on September 8 caused shares to leap 41 percent on the New York Stock Exchange.

But two days later, investment company Hindenburg Research published a report accusing the startup of 'intricate fraud' based on multiple lies by Milton, who it said 'misled partners into signing agreements by falsely claiming to have extensive proprietary technology.'

The company was accused of staging a promotional video for its Nikola One truck that reportedly didn't have an engine

That announcement triggered a plummet in share value, with stock diving 36 percent in three days.

It also sparked an investigation by the Securities and Exchange Commission, according to sources cited by Bloomberg.

In a statement announcing his resignation, Milton said: 'The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors.'

Nikola had rejected most of the claims in the Hindenburg report.

The sensational claims came just two days after General Motors announced it would be investing $2billion in the company.

In its lengthy report, Hindenburg claimed to have 'extensive evidence' that the Nikola's proprietary technology was purchased from another company.

The report accused Trevor Milton of making countless false statements over the last decade.

The company is also accused of faking a promotional video for its truck, the Nikola One, in 2018. 

In its lengthy report, Hindenburg claimed to have 'extensive evidence' that the company's proprietary technology was purchased from another company, and accused its founder and CEO Trevor Milton of making countless false statements over the last decade

The truck allegedly didn't have a functioning engine so instead it was rolled down a hill with the footage edited to make it appear as if it was driving on a flat road. 

Nikola responded that it had 'never stated its truck was driving under its own propulsion in the video' but had simply said that it had been 'in motion.' 

'Trevor has managed to parlay these false statements made over the course of a decade into a $20 billion public company,' Hindenburg wrote. 

'He has inked partnerships with some of the top auto companies in the world, all desperate to catch up to Tesla and to harness the Electric Vehicle .'  

In a tweet, Milton called the report a 'hit job' and asked the public to 'give me a few hours to put together responses to their lies'.

'It makes sense. Tens of millions of shares shorted the last day or two to slam our stock and a hit job by Hindenburg. I guess everything is fair game in war, even a hit job. I know who funded it.'

Nikola also released a formal statement, writing that the company has been 'vetted by some of the world's most credible companies and investors. We are on a path to success and will not waver based on a report filled with misleading information attempting to manipulate our stock.'

Hindenburg is betting against Nikola's shares, meaning the hedge fund will profit if its stock falls.

Nikola was listed on the stock exchange in June through a blank-check acquisition, and its shares have more than quadrupled since. 

Much of its meteoric ascent has been spurred by the belief the company could one day rival Tesla – despite having no planned sales until at least 2022.

One of Hindenburg's most striking claims comes from the allegation that the company faked a promotional video for its Nikola One truck in 2018.

Titled 'Nikola One in Motion' and published to Nikola's official YouTube page, the video appeared to show the truck driving on a level road at a high rate of speed.

But according to Hindenburg the truck didn't actually have a working engine. Instead, the company rolled the prototype along a downhill stretch of a highway and filmed it as if it was being driven.

A former employee who reportedly spoke with Nikola Chief Engineer Kevin Lynk, said Lynk told them 'how it was going to work and he said they would tow it to the top of a super low grade hill and let it roll'.

A person familiar with the video also reportedly confirmed it was faked to the Financial Times, claiming the video was shot on a hill in an isolated area of Utah. The footage was then edited to make the terrain look flat, the source said.

A personal familiar with the video also reportedly confirmed it was faked to the Financial Times, claiming the video was shot on a hill in an isolated area of Utah. The footage was then edited to make the terrain look flat, the source said

A former employee who reportedly spoke with Nikola Chief Engineer Kevin Lynk said Lynk told them 'how it was going to work and he said they would tow it to the top of a super low grade hill and let it roll'

Hindenburg reportedly conducted their own experiment down the same hill, known as the Mormon Trail, where by they claimed to have rolled a vehicle down it in neutral, reaching speeds of up to 56 mph and travelling more than 2.1 miles

Hindenburg reportedly conducted their own experiment down the same hill, known as the Mormon Trail.

They claimed to have rolled a vehicle down it in neutral, reaching speeds of up to 56 mph and travelling more than 2.1 miles.

More shockingly, Hindenburg claims the company never had any intentions of finishing development of the Nikola One, theorizing rather that the promotional video was merely a stunt to appease skeptical investors.

The Nikola One was first unveiled by the company in December 2016, and the product launch later fell subject to much scrutiny.

Milton billed the Nikola One as 'by far the most state of the art truck ever built in history'. 

He also assured in a tweet that the truck unveiled at the event would be 'functioning' and 'fully built'.

During the unveiling, he said: 'I don't want someone to end up doing something and driving this truck off the stage…so we're going to try to keep people from driving off. But this thing fully functions and works, which is really incredible.'

He then insisted three times at the close of his presentation that the truck was real.

'For every doubter out there that said there's no way this is true. How can that be possible? We've done it. It's my pleasure to actually let you guys enjoy the night, see the truck, know it's real, touch it, feel how sturdy it is. You're going to see that this is a real truck. This is not a pusher. Thank you so much everyone!'

However, a Bloomberg report from June claimed that the Nikola One truck presented on stage that night was indeed a pusher - referring to an inoperable prototype - and did not function as claimed.

Others familiar with the launch told the network they were concerned by Milton's claims about the truck. 

Gears and motors were reportedly missing, and while the words 'H2 Zero Emission Hydrogen Electric' were emblazoned on the side of the vehicle, there was no fuel cell on board.

'There wasn't a fuel cell in the truck. We never claimed there was,' Milton said, while confirming the motors and gears weren't in the vehicle for safety reasons.

Gears and motors were missing, and while the words 'H2 Zero Emission Hydrogen Electric' were emblazoned on the vehicle, there was no fuel cell on board

A close up of the H2 decal on the truck from the night of the launch is seen close up above

Behind-the-scenes photos of the launch acquired by Hindenburg purportedly show how incomplete the truck actually was in the build up to the launch.

The photos, said to have been taken three months prior, show the Nikola One consisted largely of a metal frame of rails with wheels mounted onto it.

Other vital components of the vehicle – including the body and fueling system – had reportedly not arrived and the factory workers were assembling it in was not even set up for production.

Hindenburg said that some workers were even forced to run to local hardware stores to pick up basic parts.

The body of the truck reportedly arrived in late November, roughly a week before the show.

While Milton claimed the truck was fully functioning, a source who worked on the unveiling reportedly told Hindenburg that during the show the truck couldn't function independently, so an electric cable was snaked up from under the stage through the floor of the cab.

The hedge fund published a screenshot from the reveal, purporting to show the wire peering out from behind one of the truck's wheels.

Following the success of the launch, in January 2017, Nikola raised significant capital and signed partnerships with a number of major companies, including Bosch, as well as CNH International who agreed to assist in manufacturing.

After securing the partnerships, development on the Nikola One project reportedly ceased shortly after – much to the surprise to those involved.

'It appears the prototype had already served its purpose: giving the company the legitimacy it needed to raise more investment and court larger partners that would be able to build them an actual working model from start to finish,' Hindenburg wrote. 'It was not considered necessary to actually back up the false claims that had been made on the stage.'

The group shared a text message from an alleged employee that read: 'We haven't touched the truck since the show … you didn't hear that from me.'

When questioned why investors aren't asking to see if the truck actually runs, the worker replied: 'I'm sure they do. I can't imagine how much work it would take to get that to run.'

Hindenburg claims the 'staged' promotional video was then released by Nikola more than a year on to appease any investor doubts.

While Milton claimed the truck was fully functioning, a source who worked on the unveiling reportedly told Hindenburg that during the show the truck couldn't function independently, so an electric cable was snaked up from under the stage through the floor of the cab

Behind-the-scenes photos of the launch acquired by Hindenburg purportedly show how incomplete the truck actually was in the build up to the launch. The photos, taken three months prior, show the Nikola One consisted largely of a metal frame of rails with wheels mounted onto it

The body of the truck reportedly arrived in late November, roughly a week before the show

In another instance, the fund said that Nikola had bought electrical inverters from a third-party supplier while claiming publicly to have made them in-house. The product's true branded label was then covered up with a piece of green masking tape during a demonstrational video, the group said.

'Nikola has regularly used off-the-shelf products from third parties, while claiming to have vast internal proprietary technology and to 'design' all the products itself,' the report reads. 'It then partners with companies that actually have the components Nikola claimed to have already developed internally.'

The fund also accused Milton of lying about Nikola's Phoenix headquarters being 'completely off-grid' and run entirely by solar panels in April 2019.

'We have the only off-grid headquarters that we know of, completely off of hydrogen, battery, and solar. We have 3.5 megawatts of solar up on the roof producing about 18 megawatts of energy a day in our headquarters,' Milton said during an interview. 

However a report in June 2019 by Bizjournals stated that the company had yet to install any solar panels on its roof.

Hindenburg compared two aerial images of the Nikola's headquarters from December 2019 and January 2020, which appeared to show no sign of solar panels on the roof either.

The report further suggests Nikola management overstated its internally developed battery and fuel-cell capabilities.

'Nikola announced in 2019 it would revolutionize the battery industry,' the Hindenburg authors wrote. Nikola planned to buy new technology, but the deal, according to Hindenburg, fell through.

'Nikola has never walked back claims relating to its battery technology. Instead, founder Trevor continued to publicly hype the technology.'

In another instance, the fund said that Nikola had bought electrical inverters from a third-party supplier while claiming publicly to have made them in-house. The product's true branded label was then covered up with a piece of green masking tape during a demonstrational video, the group said

The fund also accused Milton of lying about Nikola's Phoenix headquarters being 'completely off-grid' and run entirely by solar panels in April 2019. An aerial image from January 2020 appeared to show no solar panels had been installed

Nikola, whose stock rose nearly 40 percent on Tuesday following the GM investment announcement, fell almost 15 percent last Wednesday as rumors circulated of an impending critical report.

The GM deal plays an interesting role in the Hindenburg report. 

GM is getting an 11 per cent stake in the company, in exchange for agreeing to provide Nikola with hydrogen fuel cells and batteries for its vehicles.

GM will also be providing engineering support and will manufacture the company's Badger pickup truck. Nikola will be responsible for sales and marketing of the Badger.

The deal could indicate that GM's fuel-cell and battery technology is superior to what Nikola claimed to be developing internally, Barrons reported.

In a statement, GM told FT: 'We are fully confident in the value we will create by working together. We stand by the statements we made in announcing the relationship.'

Milton issued another tweeted statement late Thursday morning.

'Cowards run, leaders stay and fight for integrity,' the CEO wrote. 

'Hindenburg is only making people love us more for trying to destroy us. It will take the rest of the day to address the one sided false claims, but I will put out a detail report to address it. In the meantime, troll on.'