The founding father of the electrical truck firm Nikola was sentenced to 4 years in jail on Monday in a fraud case that highlights the monetary carnage left behind by a crop of electrical car start-ups and their promoters.

A federal decide in Manhattan, Edgardo Ramos, sentenced Trevor Milton, Nikola’s founder and former chief govt, after a jury discovered him responsible final yr of 1 depend of securities fraud and two counts of wire fraud. Mr. Milton was accused of pumping up the worth of Nikola inventory by making extravagant claims in regards to the firm.

Mr. Milton advised buyers that Nikola had working prototypes of emission-free long-haul vans, had billions of {dollars}’ price of binding orders and was producing low-cost hydrogen gas. All these statements had been false, mentioned prosecutors, who had requested Choose Ramos handy down an 11-year jail time period and a $5 million tremendous. Attorneys for Mr. Milton, who denied the costs, had sought probation.

Choose Ramos additionally fined Mr. Milton $1 million and mentioned he can be required to pay restitution, which might be decided later. Mr. Milton will stay free on bail whereas he pursues an enchantment.

Choking again tears and quoting scripture throughout a prolonged plea for mercy, Mr. Milton advised the decide that he felt “horrible for everybody concerned.” However, he insisted, “I didn’t commit these crimes.”

Choose Ramos mentioned Mr. Milton was not as unhealthy as some folks convicted of fraud whom he had sentenced, however advised him that “there have been nonetheless actual folks harm by your actions.” He added, “The loss quantity was immense.”

Few electrical car executives have been convicted of crimes, however Nikola was hardly the one new auto firm to draw billions of {dollars} of funding with out producing income or producing many vehicles or vans, leaving shareholders with large losses.

Impressed by the success of Tesla, buyers poured cash into start-ups like Canoo, Lordstown Motors and Lucid Motors lately. Their backers and executives considered electrical automobiles as an opportunity to problem established automakers like Ford Motor and Common Motors — and develop into wealthy within the course of.

With far fewer components than gasoline vehicles, electrical automobiles ought to have theoretically been simpler to fabricate. However constructing hundreds of vehicles, establishing manufacturers and assembly security requirements turned out to be rather more troublesome and expensive than many start-up executives and their backers anticipated. Some companies proved more proficient at producing lawsuits than vehicles.

Most of the electrical car start-ups listed themselves on the inventory alternate by merging with particular objective acquisition corporations, which allowed companies to keep away from a lot of the disclosure and regulatory scrutiny that accompany standard preliminary public choices of inventory.

Buyers who purchased these shares have suffered monumental losses. Shares in Nikola, which continues to be in enterprise however warned buyers in November that it may run out of cash within the subsequent 12 months, have misplaced 99 p.c of their worth since 2020.

Nikola’s inventory was buying and selling at about 90 cents a share on Monday afternoon; it traded for greater than $65 in June 2020.

One group of buyers profited — brief sellers, who make cash by betting {that a} inventory value will decline. Corporations specializing in exposing overvalued shares feasted on Nikola and different electrical car start-ups.

Mr. Milton’s false claims about Nikola had been first reported by Hindenburg Analysis, an funding agency that makes a speciality of uncovering company malfeasance.

Hindenburg additionally revealed a report on Mullen Automotive final yr that accused the corporate of promoting electrical automobiles imported from China as its personal and claiming it was near providing superior stable state batteries, a expertise that a lot bigger corporations like Toyota are nonetheless years away from perfecting. Mullen shares, which peaked at greater than $3,600 in 2020, traded lately for 13 cents.

A Mullen spokesman mentioned that “most of the factors in Hindenburg had been inaccurate on the time, and now dated, which renders all fully inaccurate now.” In current information releases, Mullen has mentioned it has begun manufacturing electrical vans at a manufacturing facility in Mississippi.

One other Hindenburg goal was Lordstown, a would-be electrical truck maker that took over a former G.M. plant in Ohio with assist from the Trump administration. President Donald J. Trump hosted Lordstown’s chief govt, Steve Burns, on the White House in 2020, calling the corporate’s car “an unbelievable idea.”

Mr. Burns resigned after Hindenburg accused him of exaggerating the variety of orders for Lordstown’s pickup truck. The corporate filed for chapter safety in June. (In October, an funding car that Mr. Burns controls purchased equipment and different Lordstown belongings.) Lordstown declined to remark.

Mr. Burns mentioned in an e mail that he by no means inflated orders, and famous {that a} examine by an outdoor regulation agency had discovered inaccuracies within the Hindenburg report. He purchased Lordstown’s belongings and employed a number of the firm’s engineers, Mr. Burns mentioned, as a result of he believes that the enterprise has distinctive expertise.

“Below the LandX model, we intend to construct a number of thrilling automobiles and sit up for asserting our full lineup quickly,” Mr. Burns mentioned.

Quick sellers have additionally focused Faraday Future, an organization primarily based in Los Angeles that has to date delivered 9 of its “extremely luxurious” electrical automobiles after a decade in enterprise.

After J Capital Analysis, one other brief vendor, revealed a report on Faraday in 2021, the corporate admitted that it had misled buyers when it claimed to have 14,000 reservations which, the truth is, had been unpaid expressions of curiosity.

In September, Faraday mentioned in a regulatory submitting that its “company tradition didn’t sufficiently prioritize compliance.” The corporate has additionally disclosed that it’s underneath investigation by the Securities and Trade Fee and the Division of Justice.

Faraday is cooperating with authorities, a spokesman mentioned in an e mail, including that the corporate has “made substantial adjustments and enhancements to course of and procedures to strengthen our governance and inside controls.”

Even for corporations that brief sellers haven’t publicly accused of exaggerating their achievements and prospects, producing automobiles has proved extremely difficult.

Canoo has introduced orders price $750 million from Walmart and different clients for its electrical vans. The corporate is growing manufacturing at a manufacturing facility in Oklahoma, a spokesman mentioned, however he declined to say when it might start delivering automobiles in giant numbers.

Canoo advised buyers in November that there was “substantial doubt” that it might survive. Though accounting guidelines required the warning, Canoo has raised $380 million to fund its enlargement, Chris Nguyen, the spokesman, mentioned.

Buyers have grown skeptical even of corporations which have managed to supply hundreds of vehicles. Shares of Fisker, which delivered about 3,000 automobiles by way of the start of November, have fallen 95 p.c from a excessive set in 2021. Shares of Lucid, which has mentioned it’ll produce at the least 8,000 luxurious electrical sedans this yr, are down 93 p.c. Shares of Rivian, a maker of electrical pickups and sport utility automobiles that many analysts contemplate the start-up most definitely to outlive, are down 80 p.c.

Much less subtle buyers typically bore the brunt of the losses. Mr. Milton, prosecutors mentioned in a sentencing memo, “engaged in a sustained scheme to benefit from particular person, nonprofessional buyers.” That included posting a video on YouTube of a prototype rolling down a hill, making a misunderstanding that the corporate had a working car.

Mr. Milton additionally lied about his private historical past, prosecutors mentioned. He had mentioned he dropped out of school to pursue his entrepreneurial desires though he was expelled for paying somebody to do his educational work.

After promoting a few of his Nikola shares for $100 million in mid-2020, Mr. Milton spent $83.5 million on luxuries like an airplane and property within the Turks and Caicos Islands.

Nikola buyers misplaced greater than $660 million, prosecutors mentioned within the memo, rejecting claims by an professional employed by the protection who mentioned the losses that could possibly be blamed on Mr. Milton had been far much less and presumably zero.