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Judge knocks down Elon Musk’s bid to end SEC consent decree

Tesla Inc CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) in Shanghai, China August 29, 2019.

Aly Song | Reuters

A federal judge on Wednesday knocked down Tesla CEO Elon Musk’s bid to terminate a settlement agreement he struck with the Securities and Exchange Commission after the agency charged him with securities fraud in September 2018. The judge also denied Musk’s motion to quash a newer subpoena by the SEC.

The financial regulators had charged Tesla and Musk with making “false and misleading” statements to investors when the CEO announced on Twitter on Aug. 7, 2018, that he was thinking of taking the automaker private at $420 a share and had “funding secured.”

Tesla’s stock price jumped by over 6% after Musk’s tweets, and Tesla trading was halted that day. Shares in the electric-vehicle maker were volatile for weeks after.

As part of a settlement agreement, Tesla and Musk each agreed to pay a $20 million fine. Musk also had to relinquish his role as chairman at Tesla for three years and agreed not to claim innocence or deny the allegations of the SEC’s complaint.

Finally, Tesla and Musk agreed to have the CEO’s tweets vetted by an experienced securities lawyer before posting them if they contained material business information likely to impact Tesla’s share price.

Free speech argument

Musk continued to use Twitter unabashedly, however.

For example, on Nov. 6, 2021, he tweeted a poll to his tens of millions of followers on the social network, writing, “Much is made lately of unrealized gains being a measure of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?” He added, “I will abide by the results of this poll, whichever way it goes.”

After that, the SEC subpoenaed Elon Musk and his brother, Kimbal Musk, who’s a Tesla board member, trying to determine if the CEO was compliant with the settlement agreement and if both were following other securities regulations.

Through his attorney Alex Spiro, Musk earlier this year complained to the court that the SEC was trying to “muzzle and harass” him with ongoing subpoenas, and trying to “chill” his First Amendment rights through oversight of his use of Twitter.

The Tesla and SpaceX chief sought to terminate the “Twitter sitter” agreement, a colloquial name for the consent decree, and asked the court to quash parts of the SEC’s subpoena.


Read More: Judge knocks down Elon Musk’s bid to end SEC consent decree

2022-04-27 17:42:33

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