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US government sues Elon Musk, may be removed as Tesla boss

Musk reportedly turns down deal with SEC


The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, CEO and chairman of Tesla, accusing him of fraud over tweets and statements he made in early August claiming he had secured funding to take the electric car maker private.

According to the SEC, the Tesla CEO "had not discussed specific deal terms with any potential financing partners, and ... allegedly knew that the potential transaction was uncertain and subject to numerous contingencies".

As such, the agency is charging him with "securities fraud for a series of false and misleading tweets" which in turn "led to significant market disruption", including a six per cent stock price surge on the day of the first tweet.

If the federal district court in the Southern District of New York agrees with the SEC, Musk may be fined, as well as barred from being a director or officer in any publicly traded company.

Steven Peikin, co-director of the SEC’s enforcement division, said "corporate officers hold positions of trust in our markets and have important responsibilities to shareholders".

"An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly," Peikin stated.

Stephanie Avakian, co-director of the commission's enforcement arm, added: "Taking care to provide truthful and accurate information is among a CEO’s most critical obligations. That standard applies with equal force when the communications are made via social media or another non-traditional form".

A report by CNBC overnight claims the SEC offered Musk a settlement deal, which he was close to signing, but backed out of at the last minute.

As part of the reported deal, Musk would pay a nominal fine and step down as chairman, while Tesla would be compelled to hire two extra independent directors. On the plus side, Musk would not need to admit guilt or relinquish his role as CEO.

In a statement to the business news channel, Musk said: "This unjustified action by the SEC leaves me deeply saddened and disappointed.

"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."

The saga started on August 7, 2018, when Musk tweeted to his 22 million followers: "Am considering taking Tesla private at $420. Funding secured."

Days later Musk admitted he had only received positive indications from Saudi Arabia's sovereign wealth fund. By August 25 Tesla announced it wouldn't go private, with Musk stating although shareholders broadly supported the move, there was "no proven path for most retail investors to own shares if we were private".

At the time of writing, Tesla shares are trading at US$268.20 ($369.55), a significant drop from US$342.54 ($471.99) before this whole affair started.

Lead image by OnInnovation via Flickr, Creative Commons

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