Shares of electric truck start-up Nikola (NKLA) sank sharply on Monday, following the overnight resignation of executive chairman and founder Trevor R. Milton, who has been fending off accusations of fraud raised by a large investor betting against the company.

The stock, traded on the Nasdaq, tumbled by over 30% at Wall Street’s opening bell on Monday, but clawed back some of those losses in midday trading. Nikola is a competitor of industry leader Tesla (TSLA), which itself has been in the crosshairs of short-seller campaigns accusing CEO Elon Musk of mismanagement and impropriety.

Nikola has been under pressure for more than a week, after activist short-seller Hindenburg Research issued an extensive report on Sept. 10 claiming Nikola “is an intricate fraud built on dozens of lies” over the course of Milton’s career.

In that report, the short-seller raised 53 questions for the company. Hindenburg’s accusations have sent the company — once one of this year’s hottest stocks — reeling, and put Nikola under a regulatory microscope. For those reasons, Milton asked the company to allow him to step down, he wrote in a Twitter post early Monday.

“The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors,” he added.

For its part, Nikola has denied the accusations as “false and defamatory” — and blasted Hindenburg’s move as “financially motivated to manipulate the market and profit from a decline” in Nikola’s share price.

It’s unclear whether Hindenburg’s accusations are legitimate, but the market action appears to be playing right into the firm’s hands. Nikola is now trading at a fraction of its 52-week highs near $94 — the spike high hit in June after the company engineered a public offering via a successful reverse merger.

It bears mentioning that until very recently, Tesla was also a favorite target of bearish investors — who have been caught flatfooted by the stock’s skyrocketing price and reversal of fortunes — becoming the subject of Musk’s ridicule.

Last week, Bloomberg reported that the Securities and Exchanges Commission (SEC) is probing Hindenburg’s claims. Nikola said in its response that it contacted the SEC and “intends to fully cooperate” with its inquiry. The Justice Department is also making an inquiry, according to a Financial Times report.

Shortly after Nikola’s response, Hindenburg Research, which pointed out that the company answered 10 of its 53 questions, characterized the company’s rebuttal as “a tacit admission of securities fraud.”

In response to Milton’s resignation on Monday, Hindenburg Research tweeted: “We think this is just the beginning.”

A ‘highly dependent’ relationship

In an 8-K filing with the Securities and Exchange Commission explaining its founder’s reasons for stepping aside, the company noted that Milton will remain an “unpaid consultant” and “will be making himself reasonably available to provide consulting services” through the end of 2020.

Milton still holds 91.64 million shares, or a 24.18% stake in the company, according to Bloomberg data. Yet the filing noted that he agreed to relinquish 100% of the 4.859 million performance-based stock units granted on Aug. 2, and any right to enter into a two-year consulting agreement with an annual fee of $10 million.

In the company’s 10-Q report issued last month, Nikola said it’s “highly dependent” on the services of Milton — and its arrangement with the founder going forward reflects that relationship.

As part of the agreement, the company committed to paying for “reasonable costs of a security inspection” of Milton’s residence and said it will reimburse him for up to $100,000 for a full-time security detail for three months.

In the August filing, Nikola stated that if Milton “were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.”

Milton also agreed to “fully cooperate” with the company in investigating, defending, or prosecuting any claim. Nikola will also pay or reimburse Milton for all out-of-pocket expenses incurred during this process, the document shows.

As for social media, Milton agreed to “promptly revise” his employment status on social media platforms, including LinkedIn so that he is “no longer identified as holding any position” with Nikola or serving on its board. Before posting about the company or its employees, Milton agreed to consult with his attorney and Nikola’s chief legal officer.

Stephen Girsky, a former vice chairman of General Motors and Nikola board member, has been appointed Nikola’s chairman, effective immediately.

Nikola did not immediately respond to Yahoo Finance’s request for comment.

Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.

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