(Bloomberg) — The founder of Nikola Corp. cost a San Diego man about $160,000 by trading the company’s hyped stock, he told the jury in Trevor Milton’s criminal fraud case.
Joseph Ryan was called to witness on Thursday by federal prosecutors, who allege Milton misled investors by exaggerating the electric truck maker’s progress in introducing vehicles for sale and by lying about Nikola’s technology and partnerships.
Ryan told jurors that he had bought stock based on Milton’s public statements that the company had succeeded in reducing the cost of hydrogen fuel from $16 per kilogram to less than $4. He told the panel it would have influenced its investment decisions. if he had known that Nikola was actually buying hydrogen for $14 a kilogram instead of producing it.
He testified that he also invested based on Milton’s claims that Nikola was en route to commercial production of the Badger pickup, and that he was misled by a video that appeared to show a prototype of a Nikola semi-truck running on its own. force drove, when in fact it was rolling down thanks to gravity.
Ryan, who said he once day traded, told the judges that Milton’s interviews and videos convinced him to hold Nikola’s stock for the long haul.
“It sounded like they were making great strides in every aspect of what they were aiming for, be it hydrogen production, the truck or the consumer truck, the Badger,” he said.
Read more: Nikola CEO says he discovered the truck had no power after his appointment
When cross-examined, Ryan agreed that Securities and Exchange Commission filings are a more reliable source of company information than press interviews, as Milton attorney Marc Mukasey suggested that day trading is risky. The defense argues that Milton simply followed the company’s marketing plan and never said anything he didn’t believe to be true.
The lawsuit comes two years after Milton abruptly resigned from the company’s board of directors, following close scrutiny after Nikola listed his shares in June 2020. Nikola could become a Tesla-esque disruptor.
Individual investors also piled on the stock, which collapsed in the wake of a short-seller report and fell 24.3% from the close before opening arguments kicked in on Sept. 13.
Milton, 40, is charged with securities and wire transfer fraud and faces a maximum prison term of 25 years if convicted of the most serious charges. The defense has cited “a distortion of Trevor Milton’s words, a distortion of Trevor Milton’s meanings, a distortion of Trevor Milton’s intentions.”
Read more: Nikolai founder Milton went rogue on social media, jury is told
The prosecution witness for Ryan was Scott Damman, a senior manager at General Motors Co. who sent GM to work with Nikola. Damman testified that Milton had falsely claimed that Nikola was responsible for most of the parts in the planned Badger pickup truck that GM would build for the EV maker.
“No components came from Nikola,” Damman told the jury in Manhattan federal court. “They owned the creative design, how the vehicle looked and felt, but all the parts had to come from General Motors.”
Damman’s testimony came in response to questions about a video interview Milton gave in 2020.
“It’s probably 70% Nikola, 30% GM, when it comes to the parts that really matter to us,” Milton said in the interview in September, the same month the Detroit automaker announced it would build and supply technology for the Badger in return for payments and an 11% equity stake.
Read more: Nikola saw ‘huge’ tie losses, but supported Milton anyway
The relationship between Nikola and GM would be brief. The short-seller’s report came just days after the partnership was announced that month, accusing Milton and Nikola of cheating. By November, GM had scaled back its stake and dropped its plans for the deployment. The Badger was scrapped.
Nikola took $5,000 deposits for Badger reservations in June 2020, when it didn’t have a prototype or plan to produce the pickup. Public discussion of the truck bolstered stock, with promises that a prototype would be unveiled at an event later that year. That unveiling also fell through.
Ryan told the court that he will continue to hold his Nikola shares. He said he can offset the gains he has made on other investments with his Nikola losses, or simply hope to profit if the company is acquired.
The case is US v. Milton, 21-cr-478, US District Court, Southern District of New York (Manhattan).
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