SEC charges Elon Musk with securities fraud for misleading tweets about Tesla

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Sept 28, 2018 (LBO) – The United States Securities and Exchange Commission (SEC) today charged Elon Musk with securities fraud for a series of misleading tweets about a potential transaction to take Tesla private.

The Chairman and CEO of Silicon Valley-based Tesla, on August 7 tweeted to his 22 million Twitter followers that he could take Tesla private at 420 US dollars per share.

He said the funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.

The SEC’s complaint, however, alleges that, in truth, Musk had not discussed specific deal terms with any potential financing partners, and he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.

According to the SEC’s complaint, Musk’s tweets caused Tesla’s stock price to jump by over six percent on August 7 and led to significant market disruption.

“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.

“An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”

“Taking care to provide truthful and accurate information is among a CEO’s most critical obligations,” added Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

“That standard applies with equal force when the communications are made via social media or another non-traditional form.”

The SEC’s complaint, filed in federal district court in the Southern District of New York, alleges that Musk violated antifraud provisions of the federal securities laws.

They seek a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company. Tesla shares tumbled 12 percent in after-hours trading.

Elon Musk called the SEC’s allegations of fraud “unjustified” and said he acted in the best interests of investors.

“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. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

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