News

SEC Files Fraud Charges Against Tesla's Elon Musk

Combined Shape

A Security and Exchange Commission lawsuit against Tesla CEO Elon Musk caused the innovative firm’s stocks to take an immediate and sustained stumble.

According to CNBC, legal documents filed on Thursday show that the company itself was not named in the suit at the time, but sources with knowledge of the situation suggest Tesla expected to be sued.

Nevertheless, the news spooked investors. Tesla stock dropped by more than 13 percent in the hours after the announcement and continued trading at roughly the same price throughout Friday morning.

The lawsuit alleges that Musk provided inaccurate and improper information in a tweet last month suggesting he planned to take the publicly traded company private.

“Am considering taking Tesla private at $420,” he wrote. “Funding secured.”

Trending:
CNN's Don Lemon Fails to Get Guest to Take 'Bait,' Instead Gets Contradicted on Slavery

In a press conference on the issue, the SEC’s co-director of enforcement described the seriousness of the charges, which could prevent Musk from serving as an officer or director of any publicly traded company — including Tesla — if he is found guilty.

“A chairman and CEO of a public company has important responsibilities to shareholders,” Stephanie Avakian said. “Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as press release or an earnings call or through less formal methods such as Twitter or other social media.”

Musk, however, maintains there was nothing inappropriate about his Aug. 7 tweet or its related followup posts.

He suggested that shareholders “could either … sell at 420 or hold shares & go private.”

Musk later signaled that his funding had been arranged through a partnership with a Saudi Arabian sovereign wealth fund.

The CEO issued his own statement in light of the court filing.

“This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk said. “I have always taken action in the best interests of truth, transparency and investors.”

He said he “never compromised” his integrity in any way through his public comments on the matter.

In a separate statement on Thursday, Tesla’s board reiterated its faith in Musk.

Related:
Family of Air Force Vet Killed on Jan. 6 Announces Major Lawsuit Against Capitol Police
Do you believe Elon Musk will be ousted as Tesla's CEO?

“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century,” the statement read. “Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.”

Despite the open proclamation and media attention his tweet received, Avakian said it amounted to a violation of the law.

“Neither celebrity status nor reputation as a technological innovator provide an exemption from the federal securities law,” she said.

According to the SEC, Musk knew at the time he posted the tweet that he “had not agreed upon any terms for a going-private transaction with the Fund or any other funding source” and had only held one meeting with the supposed investors.

The suit goes on to lay out the commission’s case against Musk, including the assertion that he posted the misleading tweet without informing key company officials.

Truth and Accuracy

Submit a Correction →






We are committed to truth and accuracy in all of our journalism. Read our editorial standards.

Tags:
, , ,
Chris Agee is an American journalist with more than 15 years of experience in a wide range of newsrooms.
Chris Agee is an American journalist with more than 15 years of experience in a variety of newsroom settings. After covering crime and other beats for newspapers and radio stations across the U.S., he served as managing editor at Western Journalism until 2017. He has also been a regular guest and guest host on several syndicated radio programs. He lives in Phoenix, Arizona, with his wife and son.
Birthplace
Virginia
Nationality
American
Honors/Awards
Texas Press Association, Best News Writing - 2012
Education
Bachelor of Arts, Journalism - Averett University
Professional Memberships
Online News Association
Location
Arizona
Topics of Expertise
Politics, Entertainment




Conversation