(Bloomberg) — The founder of Nikola Corp. cost a San Diego man about $160,000 to trade in the company’s advertised stock, he told jurors in Trevor Milton’s felony fraud trial.
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Joseph Ryan was called on the stand Thursday by federal prosecutors who say Milton misled investors by exaggerating the electric truck maker’s progress toward introducing vehicles for sale and by lying about Nikola’s technology and partnerships.
Ryan told jurors he bought the stock based on public statements by Milton that the company had been able to reduce the price of hydrogen fuel from $16 a kilogram to less than $4. He told the panel that it would have affected his investment decisions if he had known that Nicola was actually buying hydrogen at $14 a kilo instead of producing it.
He testified that he also invested based on Milton’s claims that Nikola was targeting commercial production of the Badger pickup and that he was misled by a video that appeared to show a prototype Nikola semi-truck moving under its own power while it was actually rolling down thanks to gravity.
Ryan, who said he was day trading, told jurors that Milton’s interviews and videos convinced him to hold Nikola stock for the long term.
“It sounded like they were making great progress on every aspect of the goal, whether it was hydrogen production, a truck or a consumer truck, the Badger,” he said.
Read more: Nicola’s CEO says he learned the truck had no power after renting it
On cross-examination, Ryan agreed that SEC filings were a more reliable source of information about the company than press interviews because Milton’s attorney, Mark Mukasey, suggested that day trading was risky. The defense argued that Milton was simply following the company’s marketing plan and never said anything he didn’t believe was true.
The lawsuit comes two years after Milton abruptly resigned from the company’s board, following scrutiny, after Nicola announced his stake in June 2020. The stock’s initial surge turned small investments from hedge funds and others into stakes worth billions of dollars at the time , reflecting optimism that Nikola could become a Tesla-like disruptor.
Individual investors also piled into the stock, which tumbled on the short sellers’ report and is down 24.3% from its close before opening arguments began on Sept. 13.
Milton, 40, is charged with securities fraud and wire fraud and faces a maximum of 25 years in prison if convicted of the most serious charge. The defense cited “misrepresentation of Trevor Milton’s words, misrepresentation of Trevor Milton’s meaning, misrepresentation of Trevor Milton’s intent.”
Read more: Nicola Milton founder defrauded himself on social media, jury told
The prosecution witness before Ryan was Scott Daman, a senior manager at General Motors Co. whom GM sent to work with Nikola. Daman testified that Milton falsely claimed that Nikola was responsible for most of the parts in the planned Badger pickup that GM was to produce for the electric car maker.
“There were no components coming from Nicola,” Daman told jurors in Manhattan federal court. “They owned the creative design, how the car looked and felt, but all the parts had to come from General Motors.”
Daman’s testimony came in response to questioning about a video interview Milton gave in 2020.
“Probably 70% Nikola, 30% GM when it comes to the parts that are really important to us,” Milton said in the September interview, the same month the Detroit automaker announced it would build and provide technology for the Badger in exchange for payments and an 11% equity stake.
Read more: Nicola sees ‘massive’ badger losses but still backs Milton
The relationship between Nikola and GM was to be short. The short seller’s report came just days after the partnership was announced that month, accusing Milton and Nicola of fraud. By November, GM scaled back its commitment and abandoned plans for the lawsuits. The badger was scrapped.
Nikola took $5,000 in initial payments for Badger reservations in June 2020, when there was no prototype or production plan for the pickup. Public talk of the truck boosted the stock, with a prototype promised to be revealed at an event later that year. That discovery was also overturned.
Ryan told the court he continued to hold his shares in Nicola. He said he could offset the profits he made from other investments against his losses in Nicola or simply hope to make a profit if the company was acquired.
The case is United States v. Milton, 21-cr-478, U.S. District Court, Southern District of New York (Manhattan).
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