The head of Theranos is now on trial in the U.S. for defrauding his investors. But a far more serious and brazen criminal remains at large. While Theranos was worth $8 billion at its peak, shares of Nikola, which promised to become the second Tesla, were sold for $34 billion. While Theranos failed to create a normal product, Trevor Milton never thought of creating anything real. In spite of this, Nikola's stock continues to trade on the stock exchange, and Milton is out and remains a billionaire. That's what it means to have the right name, good PR on social media, and experience in scams.
About the most creative and sweeping hoax of recent years. How the "second Elon Musk", who promised to release electric trucks, turned out to be a fraud and a crook, but got away with billions.
A poor start
In 2017, 35-year-old Trevor Milton stands proudly on stage, telling the audience about his development that will change the world. Behind him is a real electric truck! The first in the world, and able to travel 1300-1800 km with a single battery charge. Journalists are unanimously calling him the second Ilon Musk. Which may soon become even more successful than the first.
Although, it would seem, the cards from his childhood were not in his favor. Trevor was born in 1982 in the small town of Leighton (Utah). His mother died of cancer when he was 15, and his father worked four hours away. Trevor, his brother and three sisters learned to survive as best they could. After high school, he was among a mission of Mormons to go to Brazil, to the favelas, for 18 months. Later, he said, the experience made him think about broader issues, including environmental ones.
He dropped out of college after his first semester to pursue a career in sales and marketing. And in the early 2000s, he started his first company, which sold security alarms. A few years later Trevor sold the business for $300,000.
But already here, in the first deal, the future billionaire showed his character. He was able to deceive two people at once. First, his partner, to whom he said he had sold the company for only two hundred thousand. Secondly, the buyer, to whom he greatly embellished the potential and figures of his business, because of which the latter ended up making a big loss.
The road to success
In 2009, having received the first money, Trevor Milton, just like Ilon Musk ten years earlier, decided to create his own online business. He buys a site with ads for used cars. But the business doesn't go, the money is hard to come by. And then the same Musk with his Tesla goes public, and his stock rises rapidly every month. So Trevor decides to revolutionize the world of cars, too!
What kind of...? Well, for example, one could redesign existing diesel engines to run on compressed natural gas. Make a big company to do it. It's a great idea, people would definitely like it: gas has fewer emissions, less maintenance costs, and is generally safer. So Trevor creates a company called dHybrid.
Good marketing allows him to convince a logistics company to invest $2 million in the deal. He commits to converting 10 of their trucks. And if the trial version proves successful, another 800 trucks.
But the deal doesn't take off: Trevor has no engineering experience, and figuring things out is boring. In two years, by 2012, the workers he hired sent only five rebuilt trucks. And there are problems with their engines, so they don't really work. He is sued, demanding his money back. But Milton has already spent the two million he received on his personal life.
To avoid his problems with the law, and to defraud someone after all, Trevor and his father create a new company - dHybrid Systems. He chooses a name specifically similar to dHybrid. The new company does what the old company did, rebuilding truck engines. But now without the lawsuit.
He manages to fight off the lawsuit, but the money is almost gone, and Trevor is already accustomed to a luxurious life. In the same 2012, he finds another investor in Utah, to whom he offers to buy his company. But he carefully evaluates everything and, to his luck, declines the deal.
Trevor and his company continue to rebuild trucks. Then he makes contact with Worthington Industries, a successful manufacturer of propane and oxygen tanks. He describes the benefits of his company, and convinces them to buy it for $16 million. And there are two things:
It wasn't anywhere near that much.
He's not selling them dHybrid Systems, he's selling them dHybrid. An old company with debts and a lawsuit.
Then in a private conversation (it is known about it because of the Hindenburg Research investigation) Trevor said he was very lucky no one died then. Parts were falling out of his engines as he drove, which could have led to accidents on the roads.
But the main thing that mattered to Trevor was that the Worthington deal went through. And now he had $16 million to pull off his scam of the century.
In 2014, Trevor Milton, based in Salt Lake City, creates Nikola Motor, a company that is set to revolutionize the electric car market. He also starts working on the design of their new technology and their first truck.
Two years later, on May 9, 2016, Nikola Motor announces the Nikola 1, a powerful electric truck that pulls 35 tons, can travel thousands of miles without stopping, and then requires only a 15-minute recharge to drive another thousand miles.
The global trucking market is valued at more than $1 trillion, so this technology, which threatens to take a bite out of that pie, is immediately attracting interest from the public.
Unaware of Trevor Milton's past, the business world is happily discussing the potential of such a revolutionary truck. The businessman is in the news, he is invited to studios and investment forums, and hundreds of thousands of people subscribe to his Twitter feed. And so it is: a second Elon Musk is being born before their eyes!
In January 2017, Nikola presented a ready-made electric truck - as usual, on the big stage, in the style of Tesla and Apple. Nikola Motor's Twitter, which promoted the event, emphasized that the truck was already fully operational. Journalists were even allowed to sit in it and press buttons. During the presentation, Trevor particularly noted the comfortable touchscreens in the cab.
In fact, of course, it was just the only part of the truck that worked. But not from the electric motor inside, but from the usual wires running under the stage. In reality, the company did not have any manufacturing facilities. To make this prototype truck, several Nikola employees went to an ordinary construction store. There was absolutely nothing inside the frame other than comfortable seats and a couple of tablets inserted into the dashboard.
But the company has already started collecting pre-orders, at $375,000 apiece. They said the Nikola 1 has been designed, tested, and is now going into production.
According to the company, even before the presentation of the truck it collected 7 thousand orders - which is $2.3 billion. The first few thousand customers received a discount of $5000, plus they could get it in installments for six years (some are still paying it). At the same time, to avoid getting up twice, the company made a round and raised capital from investors by selling some of its shares.
But gradually time passed, and the hype from the January event dropped. Distrust was growing. People were starting to have questions. They needed to be shown something new. And then, as if on cue, a video finally appears in early 2018: the Nikola 1 truck, driving briskly through the desert! Be sure to check it out, at least a flick through, it will be relevant a little later:
Don't you see anything strange? Well, you're not alone here. Impressed by the working truck, even Arizona Governor Doug Ducey retweeted the video. And invited Nikola to build a factory in their state. To which they agreed. The stock of the company, which had not yet released a single product, went for about $5 billion in the closing rounds. With that kind of money, of course, even the most ardent skeptics now believed in the speedy mass production of the truck.
Trevor Milton owned 40% of the company. By the age of 37, he had become a billionaire.
Behind the curtain
Immediately after the Nikola 1 was announced in 2016, all work on the truck stopped (or rather, they never even started). Of course, no one outside the company knew about this. Nikola Motors itself initially consisted only of Trevor, his friends, and his father, and then they hired a few dozen more people who were mostly involved in marketing, social networking, order processing, and website maintenance. Most of them didn't know that their company didn't have a production team.
The famous driving truck video, according to a former employee, was done this way. They simply towed the truck to the top of the hill and let it roll back down. One of the truck's doors had to be taped down so it wouldn't come off. No wonder everyone who worked on the video had to sign an NDA.
And, of course, we can't forget that it was replicated in all the media how the technology and design of the truck was invented personally by Trevor Milton after two years of work. It was "one of his major accomplishments" and several millions were spent on the development. Whereas in reality, the 3D model was simply bought from a designer in Croatia for a few thousand dollars. But that didn't stop Nikola from suing Tesla for $2 billion, claiming Tesla had infringed their patents and stolen their intellectual property. Of course, Trevor didn't win the lawsuit, but the media had already spread the news. And part of the public was left with the opinion that "there is no smoke without fire", which is what they wanted.
A year after the Nikola video was shown, the company announced that they would be installing hydrogen stations all over America to fuel electric cars. Trevor said in an interview that people had thought too narrowly before that. In fact, Nikola is primarily an energy company, like Shell or BP, not an automaker. Their global goal is to change the entire energy market.
For starters, the plan was to build 700 plants in the U.S. and 70 in Europe over the next ten years. This would allow his trucks to move around without fear of running out of charge. In 2019, Trevor also talked about how their Nikola recently paid $30 million to buy more than 40 tons of hydrogen from a company in Norway. And in the future, they intend to produce their own hydrogen using solar power and other renewable sources.
That all sounds great! But if you look at the details, it turns out that Trevor's younger brother, Travis, was responsible for most of the key hydrogen technology. Who, before working at Nikola, had been pouring concrete, painting stairs, and building barn floors. And the infrastructure manager in charge of building the hydrogen stations had previously worked as a golf club manager in Idaho.
Kathy Wood, CEO of Arc Invest, responded to Trevor's claims at the time by saying that it costs three times as much to fill a car with hydrogen as it does with electricity. And, they said, why build such stations then? In response, Trevor quickly came out with an interview and said that Nikola's unique technology would make hydrogen production incredibly cheap - less than $3 per 1 kg, 81% cheaper than others are able to make. Such a gigantic scientific breakthrough, again, was answered internally by his younger brother.
All in all, Trevor's scheme is clear, and it's not a slick one. As Nikola's spokesman, he makes high-profile claims, gets a couple of interested partners. Then he uses the fact that such a partnership exists to attract investors. Shows that he has lots of investors to attract other partners, and uses their brands to get even more investors. And so it goes round and round. If at any point the scheme sags, they make even louder statements, or release a video of their "realized" project. Their YouTube channel at its peak released a video almost every month.
In October 2019, Trevor started hype on Twitter that Nikola would soon show something really big. The kind of innovation that would change the world (even more than his previous two!). At the same time in November he cashed in $70 million and bought the most expensive house in Utah, a $33 million mansion on an 1,100-hectare ranch.
On Nov. 19, Nikola announced that it had solved one of the major problems facing green energy: the high-density battery. It has developed a prototype that provides four times the energy density of standard lithium-ion batteries. And capable of supporting the Tesla Model S over 900 kilometers, for example.
Trevor Milton claimed to have seen with his own eyes how this technology works. And he promised to arrange a big demonstration soon. According to his estimates, the cost of such technology should be several hundred billion. A few weeks later, the American beer company Anheuser-Busch ordered 800 trucks with this battery.
Nikola had no patent, no engineers, no chemists, and no published scientific papers. In fact, it just bought battery maker ZapGo for $56 million, and unhyped its carbon-ion battery technology, saying it would soon change the world. The humor here is that ZapGo didn't have the technology in the first place. It was a scam. Trevor himself was duped. Apparently, "a fisherman sees another fisherman from afar" is not our case.
After shaking the public with promises, the company went public on June 4, 2020. Through a process known as "Reverse Merger," which allowed it to keep its numbers undisclosed. At first it was valued at $15 billion. But in two weeks, by June 19, the stock had doubled in value. The company reached a valuation of $34 billion. It was one of the most successful stock market exits in history. Everyone wanted a piece of the pie that would soon be worth hundreds of billions for cheap (Tesla, for example, has gone up 21,400% since its IPO). Even on Habra we had those who invested.
Now Nikola was worth more than Ford. Which, by comparison, last year produced 5.5 million cars and generated $155 billion in revenue. Nikola became the most expensive truck manufacturer in the world, and Trevor's fortune reached $13.6 billion.
In September, General Motors bought a stake in the company for $2 billion. The price was very favorable: for this money they were given as much as 11% of the shares! In response to such generosity GM undertook to produce Nikola trucks that they continued to sell actively to users from their site.
Finally, just a couple days after the GM deal, on September 10 investment firm Hindenburg Research (which is now investigating the cryptocurrency Tether) released a huge piece on Nikola. Where it covered everything we know now: Trevor's previous deceptions, the dHybrid story, how his relatives run every department of the company, the lack of even a hint of actual trucks.
The firm gathered an extensive body of evidence, including recorded phone calls, text messages, personal emails, notarized screenshots™ from Trevor's Twitter feed, and photos of highlights. They invested some serious money in this investigation, and even drove themselves up that hill from which Nikola rolled the truck in the famous video. But they didn't invest and burn out like everyone else.
Nikola's stock had already started to fall before that (the public had not been fed anything new), and then it dropped another one-third at once. The company was now worth less than $10 billion, which is actually quite impressive too, because it had nothing but a few buildings, purchased renders, fake ZapGo battery technology and a couple of hundred employees. Not so, though - the company had a successful brand. Which consisted mostly of the active Twitter account of its creator.
Trevor promised to answer questions and deny the allegations. But instead, he deleted all of his social media accounts and disappeared from public view. Even the famous video of the driving truck was removed from his official YouTube channel. And a couple of weeks later, it was announced that he was voluntarily stepping down as CEO of the company - so that it "could focus on future projects".
Several investment funds that had invested in his company sued Nikola - claiming that they had made false claims about his technology. The trial lasted nearly a year, and finally, in July 2021, a federal jury found Trevor Milton guilty of three counts of criminal fraud. Including defrauding investors, and wire fraud. Trevor was eventually released on $100 million bail. At trial, he pleaded not guilty and said he did nothing illegal.
Trevor still has a 20 percent stake in the company. Nikola is still on the market, worth $5.6 billion, and its stock has even been going up in the last two months. In other words, Trevor is still a free man and a billionaire.
Nikola continues to move forward under new management. It was reported the other day that the company has an agreement to settle all issues with regulators by paying $125 million to the U.S. Securities and Exchange Commission. The company is seeking reimbursement of that fine and legal fees from Milton, who remains its largest shareholder. Nikola also says it is not backing out of its commitments, and promises to deliver its first 25 electric trucks to customers in the U.S. by the end of this year.
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