The Unending Saga: Trevor Milton, Nikola's Bankruptcy, and the Fight for $100 Million
The story of Nikola Corporation and its charismatic, yet controversial, founder, Trevor Milton, has been a rollercoaster ride through the volatile world of electric vehicle startups, culminating in a dramatic fall from grace, legal battles, and now, the complexities of bankruptcy. At the heart of the latest chapter is a contentious fight over a subpoena, pitting the creditors of the bankrupt electric trucking company against its recently pardoned founder.
The official committee of unsecured creditors in the Nikola bankruptcy case is attempting to compel Milton to disclose details about his financial affairs. This effort stems from a significant debt Milton owes to the company: nearly $100 million resulting from an arbitration case he lost in 2023. This arbitration was tied to his criminal conviction, which found him guilty of defrauding investors with misleading statements about Nikola's technology and progress.
Despite the arbitration award, the creditors assert that Milton has yet to pay any of the nearly $100 million owed. With Nikola now in bankruptcy, recovering this sum has become a crucial step in settling outstanding claims, particularly a class action shareholder lawsuit that was ongoing when the company filed for bankruptcy in February.
A Subpoena, a Pardon, and Accusations of Derailment
The subpoena was served on Milton's lawyers on April 1, according to a recent filing in the bankruptcy case. Since receiving it, Milton has spent the last two months fighting the demand for information. His legal team has argued that the material sought by the creditors is subject to a protective order issued in a separate federal court case in Arizona, where Nikola had sued Milton prior to its bankruptcy filing. That lawsuit accused Milton of "fraudulently transferring away tens of millions of dollars of his assets in order to hinder, delay, and defraud [Nikola] in [its] attempts to collect upon the Arbitration Award," according to the creditors' committee.
This legal maneuvering occurs against a backdrop of significant recent developments in Milton's life and Nikola's corporate trajectory. Just weeks before Nikola's lawyers accused Milton of trying to derail the bankruptcy case, he received a surprise pardon from President Trump. The pardon came while Milton was appealing his four-year prison sentence for wire fraud and securities fraud.
The timing of the pardon, coupled with the accusations of interference in the bankruptcy and the ongoing fight over the subpoena, adds layers of complexity and intrigue to an already dramatic corporate saga. The dispute over the subpoena is expected to reach a critical point during a hearing scheduled for June 9.
Nikola's Tumultuous Journey: From Hype to Bankruptcy
To fully appreciate the significance of the current battle, it's essential to understand the rapid rise and precipitous fall of Nikola Corporation under Trevor Milton's leadership. Founded in 2015, Nikola aimed to revolutionize the trucking industry with battery-electric and hydrogen fuel cell vehicles. Milton, a charismatic pitchman, generated immense hype around the company, promising groundbreaking technology and a sustainable future for transportation.
Nikola went public in June 2020 through a special purpose acquisition company (SPAC) merger, a popular but often scrutinized method for startups to access public markets quickly. The company's valuation soared, briefly surpassing that of established automakers like Ford, despite having no revenue and no production vehicles.
The turning point came in September 2020 when Hindenburg Research, a short-selling firm, published a scathing report titled "Nikola: How to Trick an American Icon." The report alleged that Nikola and Milton had engaged in extensive fraud, claiming that many of the company's technological achievements were staged or exaggerated. The most famous example cited was a video showing a Nikola One semi-truck appearing to drive under its own power, which Hindenburg claimed was merely rolling down a hill.
The Hindenburg report triggered investigations by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice. Milton resigned as executive chairman shortly after the report's release. Nikola later settled with the SEC for $125 million over the misleading claims, without admitting or denying the findings.
The legal troubles for Milton escalated. In July 2021, he was indicted on federal charges of wire fraud and securities fraud. Prosecutors alleged he lied to investors about "nearly all aspects of the company." The trial commenced, revealing details of Milton's public statements and internal communications. In October 2022, a jury convicted Milton on one count of wire fraud and two counts of securities fraud. He was later sentenced to four years in prison.
The Arbitration Award: A Lifeline for Creditors
The arbitration award of nearly $100 million against Milton is a direct consequence of his legal troubles and their impact on Nikola. Following his conviction, Nikola pursued arbitration against Milton to recover damages related to the harm his actions caused the company and its shareholders. The arbitration panel ruled in Nikola's favor, holding Milton liable for a substantial sum.
When Nikola filed for bankruptcy in February, the arbitration award became one of the most significant assets remaining in the company's estate. Most of Nikola's physical assets had already been liquidated or sold off. For instance, Lucid Motors, another EV manufacturer, purchased the leases on Nikola's Arizona factory and headquarters in a bankruptcy auction, also hiring around 300 former Nikola employees. An auction company acquired Nikola's remaining fleet of hydrogen-powered trucks.
With the physical assets gone, the arbitration award represents a crucial source of funds for the unsecured creditors, particularly the shareholders who suffered losses due to the misleading statements. The plan outlined at the beginning of the bankruptcy proceedings was explicitly to use the funds recovered from Milton via the arbitration award to settle the class action shareholder lawsuit.
However, the creditors' committee's filing makes it clear that this plan is stalled because Milton has not paid. Their pursuit of the subpoena is a direct attempt to unearth the necessary financial information to understand Milton's ability to pay and to potentially identify assets that could be used to satisfy the debt.
The Fight for Financial Transparency
The subpoena demands are likely broad, seeking details about Milton's income, assets, transfers of property, and financial accounts. Such information is standard in post-judgment collection efforts and bankruptcy proceedings where creditors are trying to locate assets to satisfy debts. The creditors need this transparency to assess the likelihood of recovering the $100 million and to potentially challenge any transfers of assets Milton may have made that they believe were intended to shield funds from collection, as alleged in the earlier Arizona lawsuit.
Milton's legal team's reliance on a protective order from the Arizona case suggests they believe the financial information is confidential or restricted from public disclosure. Protective orders are common in litigation to shield sensitive business or personal financial details from being widely disseminated. The battle in the bankruptcy court will likely involve a judge weighing the creditors' need for transparency to administer the bankruptcy estate against Milton's claims of confidentiality under the protective order.
The outcome of this subpoena fight is critical for the unsecured creditors. If they cannot access information about Milton's finances, their ability to collect on the arbitration award – a primary remaining asset – is severely hampered. This, in turn, would impact the potential recovery for shareholders and other unsecured creditors in the bankruptcy.
Beyond the Courtroom: Public Perception and a Documentary
Adding another layer to this complex situation is Trevor Milton's ongoing effort to shape the public narrative surrounding his legal battles. Despite his conviction and the civil claims against him, Milton has maintained his innocence. He has even commissioned a documentary titled "Conviction or Conspiracy: The Trevor Milton Saga," which is scheduled to premiere on June 10, just after the likely hearing on the subpoena fight. Milton has stated that the documentary will tell the "true story about how the so called 'justice system' nearly destroyed an innocent man."
This public relations effort runs parallel to the intense legal and financial pressures Milton faces. While he seeks to clear his name in the court of public opinion, the creditors are focused on the tangible reality of the $100 million debt and the need to recover funds for those harmed by the actions that led to his conviction and the company's downfall.
The Road Ahead
The June 9 hearing is poised to be a pivotal moment in the subpoena dispute. The judge will hear arguments from both the creditors' committee and Milton's legal team regarding the scope and enforceability of the subpoena and the applicability of the protective order. The ruling will significantly impact the creditors' ability to pursue the $100 million arbitration award.
The Nikola bankruptcy case itself is a complex process involving the liquidation of assets and the resolution of numerous claims. The successful recovery of the arbitration award from Trevor Milton is a key variable in determining how much, if anything, unsecured creditors, including former shareholders, will ultimately receive.
The saga of Trevor Milton and Nikola serves as a cautionary tale in the world of high-flying startups and SPACs, highlighting the importance of transparency, accountability, and the significant consequences that can arise from misleading investors. As the legal battles continue, all eyes remain on the efforts to recover the funds owed and bring a degree of closure to the many parties affected by Nikola's turbulent journey.