Musk accused of fraud over Tesla tweet

Joann Johnston
September 28, 2018

In a lawsuit filed in federal court in NY, the Securities and Exchange Commission accuses Musk of committing fraud through public statements that hurt investors.

They led to confusion in the stock market and harmed investors, according to the complaint.

The SEC said it's seeking unspecified monetary penalties and, more importantly, will request that a judge bar Musk from serving as an officer or director of a public company.

On August 7, Musk tweeted that he was considering taking Tesla private at a price of $420 per share, and that funding had been "secured".

The SEC filing said funding was not secured because Musk had never discussed it with any potential financial sources, he had never investigated whether the "special objective fund" could be created, and he hadn't received "confirmed" support for the proposed transaction.

For his part, Musk has issued a statement via Tesla stringently denying all allegations, asserting that he believed he had the funding secured at the time of the tweet.

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At the time of publication, Tesla shares were down almost 12 percent in after-hours trading. "Have no idea where this will go". Musk, 47, is one of the highest-profile tech executives to be accused of fraud by the Securities and Exchange Commission.

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Neither the company nor Musk immediately responded to requests for comment. Losing its public face and guiding force would be a big blow for money-losing Tesla, which has a market value of more than $50 billion, chiefly because of investors' belief in Musk's leadership.

"The chairman and CEO of a public company has important responsibilities to shareholders", said Stephanie Avakian, co-director of the U.S. Securities and Exchange Commission's Division of Enforcement, at a press briefing.

"Musk's public statements and omissions created the misleading impression that taking Tesla private was subject only to Musk choosing to do so and a shareholder vote".

On July 31, the SEC said in its complaint, Musk met with three members of a "sovereign wealth fund" at Tesla's factory in Fremont, California, for approximately 30 to 45 minutes.

Musk also failed to notify the Nasdaq stock exchange, on which Tesla shares are traded, before releasing the go-private tweet. As of 6:03 p.m. EDT, Tesla stock was down 13.3% in after-hours trading on Thursday.

Tesla boss Elon Musk has been accused of fraud by a USA regulator over his tweets about potentially taking the electric auto company private. The lawsuit, which cites emails and text messages between Musk and Tesla executives, quoted Musk as saying he thought his girlfriend "would find it amusing". "Working on it. Will send you shortly", the CFO replies.

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