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18 Mar

US regulators sue Tesla’s Musk for fraud

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Tesla CEO Elon Musk has been accused of fraud by securities regulators.US securities regulators have accused Tesla Inc Chief Executive Elon Musk of fraud and sought to ban him as an officer of a public company, saying he made “false and misleading” tweets about taking the electric car company private.
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Musk, 47, is one of the highest-profile tech executives to be accused of fraud by the Securities and Exchange Commission.

Losing its public face and guiding force would be a big blow for money-losing Tesla, which has a market value of more than $US50 billion ($A68.8 billion), chiefly because of investors’ belief in Musk’s leadership.

Tesla shares tumbled 12 per cent in after-hours trading. Tesla was not immediately available for comment.

The SEC’s lawsuit, filed in Manhattan federal court, comes less than two months after Musk told his more than 22 million Twitter followers on August 7 that he might take Tesla private at $US420 per share, and that there was “funding secured.”

“Neither celebrity status nor reputation as a technological innovator provides an exemption from federal securities laws,” Stephanie Avakian, co-director of enforcement at the SEC, told a news conference announcing its charges against Musk.

Musk has long used Twitter to criticise short-sellers betting against his company, and already faced several investor lawsuits over the August 7 tweets, which caused Tesla’s share price to gyrate.

According to the SEC, Musk “knew or was reckless in not knowing” that his tweets about taking Tesla private at $US420 a share were false and misleading, given that he had never discussed such a transaction with any funding source.

The SEC said he also knew he had not satisfied other contingencies when he declared unequivocally that only a shareholder vote would be needed.

Thursday’s complaint also seeks to impose a civil fine and other remedies. The SEC does not have criminal enforcement power.

On August 24, after news of the SEC probe had become known, Musk blogged that Tesla would remain public, citing investor resistance.

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