Electric truck start-up Nikola said it is setting aside $125m to settle an investigation by US securities regulators and will seek reimbursement from its founder, Trevor Milton, who is facing criminal fraud charges.
The settlement is not final. According to a regulatory filing from Nikola, “the resolution is expected to include . . . findings of violations by us” of the civil provisions of the US Securities Exchange Act that bar fraud.
Nikola declined to comment on the findings of the Securities and Exchange Commission and the potential settlement.
Mark Russell, chief executive, told investors on Thursday that the company had “been engaged in discussions and co-operation with the SEC for some time regarding their investigation. We believe now that we have a potential settlement with them on the horizon.
“We’re looking forward to bringing this chapter to a close with this potential settlement and to focusing with renewed determination on building our future.”
He added that Nikola would seek reimbursement from founder Milton “for costs and damages arising from the actions that are the subject of the government investigations”.
The SEC filed a civil complaint against Milton in July, at the same time as the Department of Justice filed criminal fraud charges. The DoJ indictment said Milton misled investors about the viability of Nikola’s products and technology to drive up the company’s stock price.
A representative for Milton, who left the company last year, did not immediately return a message seeking comment. He has pleaded not guilty to the fraud charges.
While the company plans to ask its founder to reimburse the SEC fine, it and Milton are fighting over whether Nikola needs to co-ordinate with, and help pay for, his legal defence. The bill for Milton’s legal fees totalled $12.8m as of September 30, according to a regulatory filing.
In July, Milton filed a demand for private arbitration over the disagreement, the filing said, but Nikola “disputes Mr Milton’s claims and will defend itself in arbitration”.
Nikola said that if the SEC approved the deal to end the civil investigation, the $125m fine would be paid in instalments over two years. The company, which spent $9.8m on regulatory and legal matters in the third quarter, had $587m in cash and cash equivalents as of September 30.
The company said in a regulatory filing that it has suffered fallout from the negative publicity around it and Milton, as “customers, potential customers, partners and potential partners have failed to award us additional business, cancelled or sought to cancel existing contracts, and directed future business to our competitors”.
Nikola’s stock price had risen more than 12 per cent in morning trading in New York.