Trevor Milton, the founder and former chief executive of Nikola Corp, has been criminally charged with defrauding investors by lying to them about the electric- and hydrogen-powered truck maker.
In an indictment, prosecutors in New York charged Milton with two counts of securities fraud and one count of wire fraud over his statements from November 2019 to September 2020 about Nikola's products and technology.
Prosecutors said Milton, 39, misled investors in order to drive up Nikola's stock price, become one of the world's 100 richest people and "elevate" his stature as an entrepreneur.
"Milton lied about nearly every aspect of his business," US Attorney Audrey Strauss in Manhattan said at a news conference.
The US Securities and Exchange Commission filed related civil charges against Milton, who was taken into custody on Thursday.
Spokespeople for Milton had no immediate comment.
Nikola said in a statement that it has cooperated with the government and is focused on delivering Tre battery-electric trucks this year.
The company was not charged.
In morning trading, Nikola shares were down $US1.03, or 7.3 per cent, to $US13.16 after falling as low as $US12.60.
The charges mark a steep downfall for Milton, who founded Nikola in 2014 and was its CEO until June 2020.
He stepped down last September as Nikola's executive chairman two weeks after short-seller Hindenburg Research labelled the company a "fraud" and said it made many misleading statements about its technology.
Prosecutors said Milton's improper statements included that Nikola had early success in creating the "Nikola One" semi-truck that he knew did not work, built an electric- and hydrogen-powered "Badger" pick-up from the "ground up" and had developed batteries in-house that Milton knew it was purchasing elsewhere.
Nikola went public in June 2020 after merging with a special-purpose acquisition company or SPAC.
The indictment said Milton became preoccupied with keeping Nikola's stock price high upon deciding to take it public.
It said that on March 2, 2020, the day before Nikola revealed it would go public, Milton emailed a board member, saying that (we) "need to make sure we are getting retail investors on our side. That is what prevents the stock short selling. This is super important to me."
Tesla Inc is among Nikola's rivals in the electric truck sector.
Both companies' names derive from Nikola Tesla, an inventor whose work included electric power, and Tesla CEO Elon Musk is now among the world's richest people.
According to prosecutors, the value of Milton's stock in the Phoenix-based company was worth at least $US8.5 billion ($A11.5 billion) soon after the announcements regarding the Badger.
Milton is still worth $US1.2 billion, Forbes magazine said on Thursday.
Nikola initially denied Hindenburg's accusations but in February said a review by an outside law firm uncovered statements by Milton and the company that were partially or completely wrong.
"We commend regulators for acting expediently to protect investors and hold Milton accountable for his egregious lies," Hindenburg founder Nathan Anderson said in a statement.
Hindenburg issued its report two days after General Motors Co agreed to supply batteries, chassis architecture, fuel cell systems and a factory for the Badger pickup, in exchange for an 11 per cent Nikola stake and $US700 million.
The companies reworked that relationship last November, eliminating the equity stake and plans to build the truck.
Stephen Girsky, a former GM vice chairman, replaced Milton as Nikola's chairman.
Australian Associated Press