Milton is also in a spat with his neighbors and his local government over his use of a helicopter to fly to one of his mansions. Lawyers and representatives for Milton didn’t respond to several requests for comment.

The former chief executive was convicted in 2022 of three counts of fraud for repeatedly misrepresenting Nikola’s business. He was sentenced in December to four years in prison. He has appealed his conviction and remains out on bond. 

Nikola delivered 40 hydrogen-powered trucks in the first quarter, posting a loss of $147 million. Its shares now trade around record lows at 53 cents, giving the company a market valuation of less than $750 million.

Milton, 42 years old, became a multibillionaire when Nikola went public in 2020 and its soaring share price made it briefly worth more than Ford Motor. Shortly after that, the company was hammered by a report from New York-based short selling firm Hindenburg Research, which focused largely on Milton’s misrepresentations, exaggerations and stunts. Most memorable was a promotional video of a Nikola truck that appeared to be driving down a road under its own power. In reality, the truck had been rolled down a hill. 

Milton stepped away from the company days later. As part of his separation agreement, Milton retained a large stake but agreed not to vote his shares against the board of directors for three years. 

Milton quickly turned into the company’s No. 1 antagonist. Two years in a row, he refused to vote his shares to allow the company to raise capital, which would have diluted his stake, contributing to repeated postponements of shareholder meetings. 

Nikola then sued Milton late last year to collect on a $165 million arbitration judgment. An arbitration panel ruled last fall that Milton bore responsibility for 97% of Nikola’s liability from the Securities and Exchange Commission’s investigation into the short-seller’s report. 

After the three-year period lapsed last year, Milton in January proposed a slate of five directors that included social-media influencer and reality-TV actor David “Heavy D” Sparks. Milton’s projects and possessions are often featured in Sparks’s truck- and mansion-related videos. 

Nikola pushed back at Milton’s picks. which people familiar with the board’s thinking said they felt was an attempt to take over the company and prevent it from pursuing the arbitration award.

“The director nominees have no public company experience, add no skills or experience to the board, and indisputably lack the depth of experience that the current Nikola board members bring to the company,” the board said in a statement. 

Nikola’s suits against Milton now allege that Milton fraudulently transferred a majority of his remaining Nikola stake in an effort to shield his assets from the judgment.

Milton hit back publicly, accusing the board of “potentially fraudulent transactions.” He said the company sold its hydrogen-powered pickup, called the Badger, and didn’t disclose it.

“The Board’s pattern is clear: destroy stockholder value, blame Mr. Milton for the incompetence of the Board, sell off promising assets, hide information from stockholders, take no responsibility and then initiate litigation against anyone willing to expose the truth,” Milton said in a press release. 

People familiar with the matter said the Badger assets held no value on Nikola’s books. The mudfight is an unwanted distraction for Nikola, which says its business is growing. The company had $345 million in cash at the end of March. 

In New York, Milton continues to appeal his conviction on three counts of fraud relating to his conduct at Nikola. He still faces a civil trial with the SEC.

At his sentencing in December, Milton said that he never intended to deceive anyone and was innocent of the crimes for which he was convicted. In a long, teary statement, Milton compared himself to Rubin “Hurricane” Carter and the Central Park Five, defendants in two high-profile miscarriages of justice against Black and Latino men who were wrongly convicted of violent crimes and later had their convictions overturned. 

Despite his conviction, Milton retains significant wealth. He sold roughly $400 million of Nikola stock. He purchased several mansions, including a $32 million ranch that set a Utah real-estate record, and aircraft including a Gulfstream private jet and a helicopter. 

Milton has used a helicopter to fly to one of his mansions in Utah’s mountainous Wasatch County and landed on what neighbors complained was an unauthorized helipad. Milton filed for a permit for the pad, but it was denied by the county planning commission. The county commission then held public hearings about banning helipads entirely.

Milton joined the hearing electronically. “We don’t even have a helipad on our property,” Milton said. “We have a launchpad that we’ve landed on.” 

Milton responded to residents’ comments about his criminal conviction. “Do you know how many people are charged by the government for things they didn’t even do?” Milton asked. “The government’s gone crazy, this happens all the time.”

The county board last month voted unanimously to remove language on the books authorizing private helipads in the county.

Hwang’s firm used borrowed money and financial derivatives to trade heavily in a handful of tech and media stocks and help amplify its market footprint from about $10 billion to more than $160 billion over a yearlong period beginning in March 2020. 

Then, the share prices of some of Archegos’s biggest holdings began to falter, prompting a cycle of margin calls and stock sales that vaporized over $100 billion in market value within a few days. 

Prosecutors charged Hwang and Archegos’s former chief financial officer, Patrick Halligan, with racketeering conspiracy and securities fraud. They have pleaded not guilty. Each defendant faces a lengthy prison term if convicted. Two other former Archegos executives have already pleaded guilty and are cooperating with the prosecution. 

 

The demise of Archegos scorched Wall Street, with a group of banks losing more $10 billion from their exposure. As a result, regulators stepped up their oversight of how banks manage risks with their fund clients. UBS agreed to pay nearly $400 million in fines over risky dealings with Archegos at Credit Suisse, which was eventually sold to its Swiss rival after sustaining damage from Archegos. 

Archegos’s trades in companies including ViacomCBS, now known as Paramount Global, were timed and sized to maximize their market impact, prosecutors said. The firm used swaps to avoid disclosing the total size of positions, and to cause its lenders to buy additional shares as a hedge. At one point, Archegos had invested more than $30 billion into a single company using swaps, Rothman said, with $1 billion in purchases happening in one day to try to prevent a selloff.

Prosecutors argued Hwang’s motivations were a mix of greed and egoism. In court filings, they have said Hwang compared himself to Warren Buffett and Jeff Bezos at company meetings and strove to amass a fortune of $50 billion or more.

“Bill Hwang wanted to be a legend of Wall Street,” Rothman said. “He manipulated the stock prices to make himself a legend.”

Hwang’s attorneys have argued that Archegos’s trading practices and use of swaps were lawful and didn’t amount to manipulation. It was long Hwang’s style to invest in a small, concentrated number of stocks, his attorney, Barry Berke, told jurors Monday.

Hwang thought ViacomCBS and other holdings were poised to benefit from the pandemic-induced boom in video-streaming and other digital technologies and believed they resembled successful investments he made in the past, such as Netflix.

“He put his money where his mouth is, and he didn’t take it out,” Berke said. Archegos mainly managed Hwang’s personal wealth, so he bore most of the losses when Archegos blew up.   

To boost buying power, Hwang directed deputies to obtain more financing from banks by misleading them about the composition and riskiness of Archegos’s portfolio, prosecutors allege. A former executive on UBS’s risk team testified that Archegos repeatedly sought and received increases in its borrowing limit at the bank, including a request to raise it to $12 billion in March 2021, while sharing few details about its leverage and trading at other banks.

An Archegos executive told UBS at that time that its largest position represented about 35% of the firm’s capital, a manageable risk from the bank’s perspective. Prosecutors asked the former UBS executive, Brian Fairbanks, what he would have done had he known Archegos’s largest position actually represented 75% of its capital.

e probably would’ve hit the panic button,” Fairbanks said on the witness stand. 

Archegos tried to keep information about its positions from leaking into the market to ensure banks couldn’t front-run the firm, Berke said. The meme-stock stock era of early 2021, when individual investors caused losses at some hedge funds by buying shares of GameStop and other companies en masse, made Hwang value discretion even more, Berke said. 

An attorney for Halligan, Mary Mulligan, told jurors that Archegos’s performance was always volatile and that banks were eager to trade with the firm because of the fees they earned extending loans and swaps.

“The people blinded by money were the counterparties that wanted Archegos’s business,” Mulligan said.

The trial may take as long as eight weeks.

Write to Peter Rudegeair at peter.rudegeair@wsj.com

Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the May 14, 2024, print edition as 'Archegos Was a ‘House of Cards,’ Jury Told'.