Nikola agrees to pay $125 million to settle fraud charges by SEC amid SPAC crackdown

• Nikola did not admit or deny the SEC’s findings and has decided to cooperate with the investigation

• SEC found Milton misled investors about technological advancements, production capabilities, hydrogen production, reservations book, and financial outlook

Nikola Corp has agreed to pay $125 million to the U.S. Securities and Exchange Commission (SEC) to resolve fraud charges that it deceived investors by misleading them about its products, technical capacity and business prospects.

Shares of the EV truck maker jumped over 1.7% and opened at $9.41 after the agreement.

The announcement made by the SEC on Tuesday morning marked the most recent move to more thoroughly regulate special-purpose acquisition companies (SPACs) and indicated that the penalty would serve as a warning to all companies hoping to enter public markets via a merger deal with a SPAC.

What went wrong with Nikola? READ: Nikola founder Trevor Milton indicted with securities fraud

The SEC in a statement, said the order finds that Nikola’s founder and former CEO Trevor Milton misled investors about technological advancements, in-house production capabilities, hydrogen production, reservations book, and financial outlook.

Charges against Nikola and Milton

The securities regulators accused the electric vehicle maker of violating U.S. securities laws after Nikola made numerous misleading statements between March to September 2020.

In July 2021, the SEC filed civil and criminal charges against Milton for using social media to repeatedly mislead investors about the company’s technology and capabilities, reaping “tens of millions of dollars.”

ALSO READ: EV maker Lucid shares fell almost 20% amid SEC probe

The founder who resigned from the chief executive position in July is battling those charges in court after losing a bid to dismiss or move the case.

Although the EV truck maker is paying to settle the charges, Nikola, which did not admit or deny the SEC’s findings, has decided to cooperate with the ongoing litigation and investigation, the SEC said.

Nikola “is responsible both for Milton’s allegedly misleading statements and for other alleged deceptions, all of which falsely portrayed the true state of the company’s business and technology,” Gurbir Grewal, the SEC’s enforcement director, said in the statement.

SPAC crackdown

Earlier this month, SEC Chair Gary Gensler said he is concerned over blank-check firms and will push for much stricter rules for the SPACs.

He also indicated that the agency was considering toughening rules around how underwriters, boards of directors and sponsors of SPACs structure fees, issue projections and disclose conflicts to impose a broader crackdown on the sector.

ALSO READ: Trump SPAC deal under investigation by financial regulators

Moreover, the agency has also launched an investigation on luxury electric-car maker Lucid and Digital World Acquisition Corp, the blank check company which planned to merge with former U.S. President Donald Trump’s social media firm.

Picture Credit: Reuters