Legal Considerations
in Responsible Investment

On October 14, 2022, Trevor Milton—founder and former CEO of the electric vehicle and energy company Nikola— was found guilty of two counts of securities fraud and one count of wire fraud. Milton’s scheme targeted retail investors by repeatedly touting the viability of a fleet of hydrogen powered zero emission trucks on podcasts and social media. At the time Milton made these statements, Nikola had yet to create a working prototype of a zero-emission vehicle. Milton’s false statements regarding the functionality and viability of Nikola’s zero-emission trucks are a stark example of “greenwashing.”

As ESG investing has increased in popularity, many companies have sought attract ESG investors and environmentally minded consumers by marketing their companies, or their companies’ products as “sustainable” or, “green.” This practice is known as “greenwashing,” which occurs when a company makes an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do, or state that an environmentally friendly product is functional or economically viable when it is not. A recent example of greenwashing involves Trevor Milton, the founder and former CEO of the Nikola Corporation (“Nikola”), who was recently found criminally liable for making misleading statements that misrepresented Nikola’s ability to produce its own cheap hydrogen technology and the viability of its fleet of zero emission trucks. The company even went as far as to release a promotional video of for its Nikola One truck, which showed the vehicle moving rapidly along a highway. A Hindenburg research report later revealed that the Nikola One was nowhere near fully functional, and that the truck used in the video was not running on its own power, but just rolling down a hill.

Milton was convicted of two counts of securities fraud and one count of wire fraud on October 14, 2022 by a federal jury in the Southern District of New York. Milton was found to have defrauded investors by repeatedly touting the functionality of Nikola’s electric trucks during various media appearances and on social media in 2016. Prosecutors noted that Milton’s scheme was specifically targeted retail investors and that many of Milton’s false statements regarding the viability of Nikola’s zero emission trucks that were the subject of the trial were made on podcasts and social media.

During these appearances, Milton made false claims regarding nearly all aspects of Nikola’s business, including: false and misleading statements that the company had early success in creating a “fully functioning” semi-truck prototype known as the “Nikola One,” while knowing the Nikola One prototype was inoperable. Milton also falsely claimed that Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as “the Badger” using Nikola’s own parts and hydrogen technology, when Milton knew that was not true.

The G&E ESG Institute will continue to monitor securities fraud litigation related to “greenwashing.”