Civil proceedings were commenced yesterday in New York against Trevor R. Milton, the founder, former CEO and former executive chairman of Nikola Corporation, for repeatedly disseminating false and misleading information – typically by speaking directly to investors through social media – about Nikola’s products and technological accomplishments.

The SEC alleges that Milton founded Nikola in 2015 with the primary goal of manufacturing trucks that run on alternative fuels with low or zero emissions, and building an alternative fuel station infrastructure to support those vehicles. Milton allegedly helped Nikola raise more than USD1,000 million in private offerings and to go public through a business combination conducted by a special purpose acquisition company, often known as a SPAC.

According to the SEC’s complaint, during that time and after Nikola was publicly traded, Milton acted as Nikola’s primary spokesperson appearing regularly on national media and communicating directly with investors through social media.

Milton allegedly encouraged investors to follow him on social media to get “accurate information” about the company “faster than anywhere else.”

Instead, however, Milton allegedly used his extensive media platform to repeatedly mislead investors about, among other things, Nikola’s technological advancements, products, in-house production capabilities, and commercial achievements.

The complaint further alleges that Milton ultimately reaped tens of millions of dollars in personal benefits as a result of his misconduct.

The SEC’s complaint alleges that Milton breached the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks a permanent injunction, a conduct-based injunction, an officer and director bar, surrender of proceeds with pre-judgment interest and civil penalties.

This is not a criminal prosecution: that, one suspects, will be the next step because the SEC's case has been built in conjunction with the US District Attorney's Office for the Souther District of New York. Perhaps more surprising to readers outside the USA is that the U.S. Postal Inspection Service is also involved: the generally low profile agency is widely considered to be the most powerful enforcement agency in the USA.

“Having chosen to promote Nikola through social media, Milton was obligated under the securities laws to communicate completely, accurately and truthfully,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “That obligation exists for all public company officials, even those whose companies have only recently entered the public markets through Special Purpose and Acquisition Company transactions.”

It's only a matter of time, surely, before these companies come under intense scrutiny before they commence operations rather then waiting for them to get into trouble?