nikola – Techdirt (original) (raw)

Former Nikola CEO Gets 4 Years In Prison For Playing Make Believe With Investors

from the fake-it-til-you-make-it dept

The saga of former Nikola CEO Trevor Milton has come to a close. We began talking about Nikola, a company that bill itself as “decarbonizing” the trucking industry by selling electric long-haul trucks, back in 2020 when it was revealed that a very slick demo of its products had been totally staged. Like, hilariously staged. As in the truck couldn’t move on its own so they towed it down the start of a downward slope on a hill and then recorded it moving “on its own.” Once word got out, Nikola got busy trying to hide all of this from the public view via DMCA takedown notices, which of course Streisand-ed the story into further public view. Milton then handed off his CEO duties and became Chairman of the Board, only to resign that position in September of 2020 as the deal the company had struck with General Motors went from a blockbuster to a flop, because of how pared back the deal became.

But it all stemmed from Milton’s promotional materials that made it look like the company had a working product when it very much did not, as well as overstating for investors how real the partnership deals the company had struck actually were. And the end result of that for Milton is going to be several years in prison.

The disgraced founder and former CEO of the “zero emissions” truck company Nikola, Trevor Milton, was sentenced to four years in prison on Monday, Bloomberg reported. That’s a lighter sentence than prosecutors had requested after a jury found Milton guilty of one count of securities fraud and two counts of wire fraud in 2022. During the trial, Milton was accused of lying about “nearly all aspects of the business,” CNBC reported.

Nikola’s stock peaked in 2020, but then dozens of fraud allegations were reported by the investment firm Hindenburg Research, causing Nikola stock to plummet promptly. “We have never seen this level of deception at a public company, especially of this size,” Hindenburg Research’s report said. Facing backlash, Milton resigned, voluntarily withdrawing from his company and selling off 100millioninNikolastocktofundmorethan100 million in Nikola stock to fund more than 100millioninNikolastocktofundmorethan85 million in luxury purchases, the Times reported. Today, Milton remains Nikola’s second-largest shareholder, Bloomberg reported.

Misleading investors and inflating the company stock price by fudging just how workable your electric vehicles’ features are? Where have I heard that one before?

Yes, one of the questions that must be floating around in Milton’s head at the moment has to be, “How come I’m going to jail and Elon Musk remains free?”

Not that Milton has done a particularly good job of defending himself, of course. His excuses at trial amounted to claiming that he didn’t have a ton of experience being a CEO. Apparently CEO classes don’t include a course called “Don’t lie to your investors and other great advice you shouldn’t actually need.” Absurdly, Milton also asked the court to sentence him to mere probation, arguing all along that he didn’t intend to lie to investors, but was rather simply very optimistic about his company and its products.

But Nikola’s trucks don’t run on optimism and optimism isn’t what Nikola’s investors were hoping to get in return for their hundreds of millions of dollars in funding. Nor were the tears that Milton shed in court, for that matter.

And now it’s left to current CEO Steve Girsky to try to pick up the pieces and save a company that many expect to go out of business. For what it’s worth, with the spotlight of the investing world firmly on Nikola, Girsky is trying to put out some good news.

Girsky seems keen to move past the scandal by promoting Nikola’s latest successes. In September, Girsky boasted that daily tests showed that one of Nikola’s fuel cell trucks could successfully run for 900 miles.

“This was quite an accomplishment, and I defy anyone to find another zero-emission vehicle truck anywhere that can run up to 900 miles in a day,” Girsky said.

However, since the 2020 scandal, Nikola’s stock has dropped 99 percent, Forbes reported, and now an investor analytics company called Macroaxis has estimated that Nikola has an 81 percent chance of going bankrupt.

And it’s not hard to understand why. Even if Girsky does everything right, and even if Nikola is actually progressing to a real, market-ready electric truck that would otherwise be in demand in the marketplace, the kind of things Milton has been sentenced to prison for are reputation killers. The company may not survive without more funding and how many people want to invest in this company now?

Filed Under: deception, ev, securities fraud, trevor milton
Companies: nikola

Content Moderation Case Study: Electric Truck Company Uses Copyright Claims To Hide Criticism (2020)

Summary: There are many content moderation challenges that companies face, but complications arise when users or companies try to make use of copyright law as a tool to block criticism. In the US, the laws around content that allegedly infringes on a copyright holder’s rights are different than most other types of content, and that creates some interesting challenges in the content moderation space.

Specifically, under Section 512 of the Digital Millennium Copyright Act (DMCA), online service providers who do not wish to be held liable for user-posted material that infringes copyright need to take a few steps to be free of liability. Key among those steps is having a “notice-and-takedown” process, in which a copyright holder can notify the website of allegedly infringing material; and if the website removes access to the work, it cannot be held liable for the infringement.

This process creates a strong incentive for websites to remove content upon receiving a takedown notice, as doing so automatically protects the site. However, this strong incentive for the removal of content has also created a different kind of incentive: those who wish to have content removed from the internet can submit takedown notices claiming copyright infringement, even if the work does not infringe on copyright. This creates an interesting challenge for companies hosting content: determining when a copyright takedown notice has been submitted for illegitimate purposes.

In September of 2020, news was released that Nikola, an alternative energy truck company’s promotional video showing its new hydrogen fuel cell truck driving along a highway was false. A report by a research firm criticized the company, saying that the truck did not move under its own propulsion. As it turned out, the truck did not actually have a hydrogen fuel cell and was instead filmed rolling downhill; Nikola admitted that it had faked its promotional video. In Nikola’s response, it admits that the truck did not move on its own, but it still claimed that the original report was “false and defamatory.” While the response from Nikola does highlight areas where it disagrees with the way in which the research firm wrote about the company’s efforts, it does not identify any actual “false” statements of fact.

Soon after this, many YouTube creators who made videos about the situation discovered that their videos about the incident were being removed due to copyright claims from Nikola. While video creators did use some of the footage of the faked promotional video in their YouTube videos, they also noted that it was clearly fair use, as they were reporting on the controversy and just using a short snippet of Nikola’s faked promotional video, often presenting it in much longer videos with commentary.

When asked about the situation, Nikola and YouTube spokespeople seemed to give very different responses. Ars Technica’s Jon Brodkin posted the comments from each side by side:

_“YouTube regularly identifies copyright violations of Nikola content and shares the lists of videos with us,” a Nikola spokesperson told Ars. “Based on YouTube’s information, our initial action was to submit takedown requests to remove the content that was used without our permission. We will continue to evaluate flagged videos on a case-by-case basis.”

YouTube offered a different description, saying that Nikola simply took advantage of the Copyright Match Tool that’s available to people in the YouTube Partner Program.

“Nikola has access to our copyright match tool, which does not automatically remove any videos,” YouTube told the [Financial Times]. “Users must fill out a copyright removal request form, and when doing so we remind them to consider exceptions to copyright law. Anyone who believes their reuse of a video or segment is protected by fair use can file a counter-notice.”

Company Considerations:

Issue Considerations:

Resolution: After the press picked up on the story of these questionable takedown notices, many of the YouTube creators found that the takedown demands had been dropped by Nikola.

In July of 2021, nine months after the news broke of the faked videos, Nikola’s founder Trevor Milton was charged with securities fraud by the SEC for the faked videos.

Originally posted to the Trust & Safety Foundation website.

Filed Under: censorship, content moderation, copyright, criticism, dmca, dmca 512, takedowns
Companies: nikola, youtube

Nikola's Bad Quarter: Company's Deal For General Motors Ownership Stake Goes Sideways

from the fallout dept

The trouble for Nikola Motor Company began only in September, a couple of months ago. That’s when a hedge fund very publicly called out the company and its founder, Trevor Milton, for essentially fooling people with doctored video of its electric semi-truck product to get them to invest in the company. This led to rumors of federal investigations, the resignation of Milton, and the company idiotically trying to use copyright takedowns to silence its critics. All of this was likely in the service of trying to save a very public $2 billion deal with General Motors that was due to be closed upon in early December.

Well, what was Nikola’s bad month is turning into a very bad quarter, as the General Motors deal has gone fairly sideways.

Nikola (NKLA) won’t have General Motors (GM) as an investor, at least for right now.

The electric truck maker said on Monday it has revised the terms of a prior deal with GM, and that the auto giant won’t be taking a stake in Nikola. The two companies will not work together to produce Nikola’s pickup truck, the Badger. Nikola’s shares were down more than 21% in pre-market trading.

The Badger was supposed to be a consumer pickup truck made in partnership with GM, utilizing GM’s manufacturing and logistics operations alongside Nikola’s electric batteries and drivetrain. But now, the general consensus is that this deal going under with GM has rendered the Badger completely dead.

EV and hydrogen truck start-up Nikola’s deal with General Motors has fizzled, the EV startup revealed, after several weeks of speculation about a deal that would have seen the Michigan auto giant produce the Nikola Badger truck. Nikola indicated that it had reached a non-binding memorandum of understanding with GM regarding collaboration on GM’s hydrogen technology for large trucks, but that the pickup aimed at private consumers was not currently contemplated with GM backing. In fact, the Badger now appears entirely dead, with Nikola indicating that it will refund deposits for the EV truck.

For its part, Nikola is pointing to the deal with GM not being completely dead. Instead, the company is going to focus on producing semi-trucks that GM will make the fuel-cell technology for. The deal is now essentially a basic supply partnership, but the real impact of the change of deal terms is that GM has backed away from taking an ownership stake in Nikola.

But Dan Ives of Wedbush Securities writes in a new note that the “headline” from the new agreement is that GM won’t be taking a stake in Nikola — and that news “will be viewed as a clear negative.”

“This went from a game changer deal for Nikola to a good supply partnership but nothing to write home about and the Street will be disappointed accordingly along with lingering lockup worries,” Ives wrote.

All because the company’s founder wanted to pretend like it had a produced a product that did something that it absolutely did not. It sure seems like it would have been better for the company overall if it had just told the truth.

Filed Under: badger, copyright, electric trucks, investment, trevor milton
Companies: general motors, nikola

from the keep-digging dept

PR crisis management is not an easy gig. When a company suffers through a tumultuous period, it is all too easy for a company to try to combat the bad press through all kinds of means that are, in the end, a detriment to the effort. Instead, good PR crisis management follows three chief axioms: don’t lie, don’t try to downplay the severity of the crisis, don’t be afraid to say you screwed up.

Nikola Motor Company is doing a shit job of following this advice. As we detailed recently over the course of a couple of posts, the company is very much in the middle of a PR crises. It began when a hedge fund revealed that Nikoa founder Trevor Milton allegedly flat-out lied to the world about having a working Nikola 1 model in 2016, with the obfuscation going so far as to put out a video of the truck driving down a highway, when the reality was that the truck was rolling down a hill not under its own power. After that public report, Nikola missed the first deadline to have a major partnership deal with General Motors. The stock tanked, massively. Milton suddenly found himself facing two charges of sexual assault, one of them from his own cousin.

If ever there was a time when a company needed to follow good crisis PR protocols, this was it. Instead, the company is apparently quite busy trying to use the DMCA process to silence critics on YouTube.

As noted in a Financial Times report, a number of financial commentator channels on YouTube have reported that they received takedown notices from the hydrogen truck maker, resulting in several videos being removed from the video-sharing platform. In a statement to the publication, Sam Alexander, a Nikola critic and YouTube host, stated that he received notifications on Wednesday that at least four of his videos were reported for copyright infringement. All four of the videos featured sections of the “Nikola One in Motion” ad.

The same was true for fellow content creator Tom Nash, whose finance-themed channel has 41,000 subscribers. According to Nash, he was required to take down three critical Nikola videos including one that featured sections of the rolling Nikola One prototype. Nikola reportedly took issue with Nash’s use of videos that featured its prototype jet ski and hydrogen station as well. “It’s what you would call a death sentence for a creator. This is my livelihood. I have three kids. I quit my job to do this,” Nash told the FT.

Honestly, it’s more that this is what you would call a death sentence for the company trying to abuse copyright law to silence critics who’s critiques clearly fall under fair Uue. Put another way: if the company had a fallback position other than trying to censor its critics, it would have played to that position. Instead, Nikola is very much opening itself to both liability for bullshit DMCA claims and, more importantly, to even further public criticism as a result of the company trying to bury the public’s head in the sand.

Now we’re in pure Streisand territory. As a result of the company trying to bury criticism, that criticism is getting even more play and attention than it already had. If this strategy was thought to be a good idea by those in charge of Nikola, then maybe it truly would be best if the company just bad-acted itself into oblivion.

Filed Under: censorship, copyright, criticism, takedowns, trevor milton
Companies: nikola

Nikola Is Having A Bad Month: GM Contract Now Potentially In Jeopardy

from the it-pours dept

Nikola Motor Company, to put it mildly, is having itself a bad month. First came the bombshell reports from a hedge fund that founder Trevor Milton lied in 2016 when he told the world that the company had a fully functional Nikola 1 electric semi truck. Worse than that, it was revealed that a promotional video in 2018 showing the truck rolling down a lonely highway, was actually showing a Nikola 1 rolling down a hill, since the truck couldn’t actually move under its own power. Milton resigned after those reports, but the hits kept coming. Two women have come forward claiming that Milton inappropriately groped them when each was fifteen, with one of those women being his cousin. For the record, Milton has denied both allegations.

But the fallout appears to be continuing. September 30th was supposed to be the date by which Nikola’s notable contract with General Motors was to have closed. That deal appears to be in limbo, however, with regulatory filings indicating that both sides now have until December to sign the deal or terminate it.

A GM spokesman confirmed the delay in an email to Ars. “Our transaction with Nikola has not closed. We are continuing our discussions with Nikola and will provide further updates when appropriate.”

Also this morning, Nikola published a revised overview of the company’s business strategy. It discussed Nikola’s plans to manufacture semitrucks in Europe and the United States, build a network of hydrogen fuel stations, and even plans for an electric all-terrain vehicle. But conspicuously missing from the document was any mention of the Badger pickup truck—the one that GM was supposed to manufacture for Nikola under the now-delayed partnership.

Nikola also announced today that it was indefinitely postponing Nikola World, the December event where Nikola was planning to debut the Badger. Nikola blamed the COVID-19 pandemic and related social distancing rules for the delay.

So a lot of bad, without a lot of clarity as to the reasons for any of this. In the absence of clear communication, speculation is the sport of the day. Some are suggesting that GM doesn’t want to be associated with the company right now, with all of the bad PR currently in play. Others are noting that the deal between Nikola and GM is very much one-sided in favor of GM, but the recent issues have lowered the value of the deal. The chief example of this is that GM was to be paid by Nikola in stock worth 2billionatthetimethedealwaswritten.Inthelastmonth,Nikola’sstockpricehasdroppedsuchthatthevalueofthatstockisnowlessthan2 billion at the time the deal was written. In the last month, Nikola’s stock price has dropped such that the value of that stock is now less than 2billionatthetimethedealwaswritten.Inthelastmonth,Nikola’sstockpricehasdroppedsuchthatthevalueofthatstockisnowlessthan1 billion. So, part of this might be GM now trying to negotiate for better terms that reflect the original deal.

Either way, while the risks in the deal for GM are small, the reputational risks are very, very real.

So the financial risk for GM was quite small. GM wasn’t putting any money into Nikola. GM was supposed to do engineering work on the Badger in exchange for those Nikola shares, but if Nikola failed GM would likely be able to repurpose some of that work for use in a future GM-branded electric pickup truck.

But the deal also creates some reputational risk for GM. If, hypothetically, more evidence of fraud or other misconduct came to light that led to Nikola’s failure, GM could be tainted by association even if its financial exposure was small. GM’s name wouldn’t be on the Badger pickup truck, but customers would know GM manufactured the truck, and some of them might blame GM if the Badger didn’t work well.

Which brings us back to our original post on Nikola, the theme of which is that you cannot risk your reputation like this. Chances are, you’re going to get found out and, when you do, the consequences will vastly outweigh any benefit you get from your fuckery.

Filed Under: electric trucks, trevor milton
Companies: gm, nikola

How To Nuke Your Reputation: The Nikola Edition

from the going-downhill dept

This isn’t so much in vogue as it was in the past, but it still remains true that one’s reputation is a scarce resource that can be frittered away easily. And, on these pages at least, it is often equal parts perplexing and funny to watch some folks in the tech space torpedo their own reputations for various reasons. The more shrewd don’t always seem to care about this sort of thing, which is how you get the MPAA pirating clips from Google to make its videos, or a law school taking a critic to court only to have the court declare said critic’s critique was totally true. Good times.

Which brings us to Trevor Milton, the founder of Nikola Motor Company. Nikola is playing in the electric truck vehicle space. In 2016, Milton announced in an official video that the Nikola One Semi was “fully functional.” In fact, one of Milton’s chief public concerns at the time was ensuring that nobody could come by and drive away with one of the trucks. The companion video for the Nikola One was posted to YouTube in January of 2018. This video shows the Nikola One chugging down a lonely one-lane road.

Despite all of the fanfare, it’s worth noting that the Nikola One never made it into production. Why? Well…

Hindenburg Research published a bombshell report claiming that the Nikola One wasn’t close to being fully functional in December 2016. Indeed, Hindenburg published a 2017 text message exchange in which a Nikola employee stated that the company didn’t resume work on the truck in the months after the show.

Even more incredible, Hindenburg reported that the truck in the “Nikola One in motion” video wasn’t moving under its own power. Rather, Nikola had towed the truck to the top of a shallow hill and let it roll down. The company allegedly tilted the camera to make it look like the truck was traveling under its own power on a level roadway.

Now, on the one hand, that’s objectively funny. It’s sort of an Adam West’s Batman approach to product demonstration. But, on the other hand, now that Milton has admitted the charges above, he’s likely in a whole world of trouble. The company has tried to weasel out of this in fairly absurd fashion.

“Nikola never stated its truck was driving under its own propulsion in the video,” Nikola wrote. “Nikola described this third-party video on the Company’s social media as ‘In Motion.’ It was never described as ‘under its own propulsion’ or ‘powertrain driven.’ Nikola investors who invested during this period, in which the Company was privately held, knew the technical capability of the Nikola One at the time of their investment.”

Not everyone seems to think that’s true. The SEC and DOJ are reported to have opened investigations into the company’s behavior after these revelations. And, as to the point of Milton’s reputation personally, he’s out at Nikola.

Milton’s resignation came just 10 days after a bombshell research report revealed that Milton wasn’t telling the truth in 2016 when he unveiled the company’s first product, the Nikola One, and claimed that it “fully functions.” Over the weekend, Milton offered (voluntarily, he says) to resign as executive chairman, and Nikola’s board accepted his offer. Milton will also relinquish his seat on Nikola’s board.

Now, a few items of note. First, Nikola does now have a functioning prototype, the Nikola Two. It’s also partnering with several automobile companies and has contracts in place with them.

But for Milton, he loses his position at the company he founded, millions in stock and consulting fees, and has gained infamy as someone who is willing to, at best, mislead the public about his companies’ products. Your reputation is a scarce good. Frittering it away by turning the camera on an angle probably isn’t the best move.

Filed Under: electric truks, electric vehicles, fake videos, nikola one, trevor milton
Companies: nikola