Electric semitruck startup Nikola agreed to pay $125 million to settle charges brought by the Securities and Exchange Commission (SEC) for defrauding investors by misleading them about its products, technical advancements, and commercial prospects.

The settlement follows the SEC’s litigated action filed earlier this year against Trevor Milton, the company’s founder and former chief executive officer and executive chairman. Nikola disclosed in November it had reserved $125 million for the expected settlement.

Under the agreement, announced Tuesday, Nikola agreed to cease and desist from future violations of the antifraud and disclosure control provisions of the federal securities laws. The company also agreed to continue cooperating with the SEC’s ongoing litigation and investigation. The SEC’s order establishes a fund to return penalty proceeds to victim investors.

Nikola neither admitted nor denied the SEC’s findings in this matter.

The details: Nikola has faced enhanced scrutiny since going public last year following a merger with a special purpose acquisition company (SPAC). The startup was the subject of a report in September 2020 by short seller Hindenburg Research, in which it described Nikola as “an intricate fraud built on dozens of lies” made over Milton’s career.

Following that report, Nikola first disclosed in November 2020 it had received subpoenas from the SEC and the Department of Justice regarding fraud allegations.

According to the SEC’s findings, Nikola made numerous material misrepresentations to investors about key aspects of its business from at least March 2020 through September 2020. As stated in the agency’s order, “Before Nikola had produced a single commercial product or had any revenues from truck or hydrogen fuel sales, Milton embarked on a public relations campaign aimed at inflating and maintaining Nikola’s stock price.”

From at least March 2020 through September 2020, Milton’s statements in Twitter posts and media appearances “painted a picture of Nikola that diverged widely from its then-current reality,” the order continued.

“Milton did not routinely consult with anyone at Nikola before publishing Nikola-related information on his or Nikola’s social media accounts, or before being interviewed about Nikola on television programs and podcasts,” the order stated. “Likewise, no one at Nikola routinely reviewed Milton’s social media posts prior to their publication, and executives and employees alike frequently learned of Milton’s interviews after they aired. Further, Nikola did not correct these statements.”

Deficient controls and procedures: The SEC found Nikola’s disclosure controls and procedures for monitoring or reviewing Milton’s interviews and social media activity to be deficient.

“Nikola did not design, implement, or maintain adequate disclosure controls or procedures to assess whether the information Milton published via social media and television and podcast appearances was required to be disclosed in Nikola’s Exchange Act reports within the time periods specified in the Commission’s rules and forms,” the agency stated.

“Similarly, Nikola did not have processes in place to ensure that information published by Milton was communicated to management to allow timely decisions regarding required disclosure,” the order continued.

The SEC’s order describes in detail how Milton allegedly misled investors about Nikola’s technological advancements, in-house production capabilities, hydrogen production, truck reservations and orders, financial outlook, and more.

“As the order finds, Nikola Corporation 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,” said SEC Enforcement Division Director Gurbir Grewal in a press release. “This misconduct—and the harm it inflicted on retail investors—merits the strong remedies today’s settlement provides.”

Nikola response: “We are pleased to bring this chapter to a close as the company has now resolved all government investigations,” the company stated. Nikola added it has taken action to seek reimbursement from Milton “for costs and damages in connection with the government and regulatory investigations.”

In addition to his SEC case, Milton was charged by the Department of Justice in July with two counts of securities fraud and one count of wire fraud.

Milton last year resigned his post as executive chairman and was replaced by former General Motors Vice Chairman Stephen Girsky.