SEC Sues Elon Musk For Securities Fraud Over “Funding Secured” Tweet

Tesla CEO Elon Musk has gotten in plenty of trouble over his Twitter habit and it looks like he’s finally facing the music over his infamous “funding secured” tweet.

In a lawsuit filed earlier today in the United States Southern District Court of New York, the Securities and Exchange Commission says Musk “falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price.” The lawsuit goes to says that the executive indicated “funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote.”

Despite these assurances, the SEC alleges that “Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.”

The lawsuit claims Musk’s tweet “Am considering taking Tesla private at $420. Funding secured” was false and misleading. The government goes on to say it was followed by a “series of additional materially false and misleading statements” including:

1) “My hope is *all* current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla.”

2) “Shareholders could either to [sic] sell at 420 or hold shares & go private.”

3) “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”

The government says Musk “knew or was reckless in not knowing” that each of these statements was false and/or misleading because he “never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going private transaction.”

Besides making false and misleading statements, the government claims Musk’s Twitter shenanigans “caused significant confusion and disruption in the market” and harmed investors. In particular, the government says Tesla stock closed up 10.98% from the previous day following the tweet.

The lawsuit seeks a “permanent injunction disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company.” If the government is successful, Musk would no longer be able to serve as the leader of companies such as Tesla, SpaceX and The Boring Company.

In a statement, the co-director of the SEC’s Enforcement Division, Steven Peikin, 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.”

  • Mr. EP9

    This has been so disastrous for Elon I’ve ran out of things to say.

    • Banesto Highland

      I’m sure you’ll come up with something. $ or Rubles can cure writers-block.

  • Jason Miller

    People always looking to force money out of somebody. “I don’t like what you said on the internet, so I’m going to take your money to teach you a lesson”. Gotta love it.

    • BGM

      Musk has a history of making grand and obfuscating pronouncements regarding Tesla whenever the market catches a whiff of how poor an investment it is. Then all all the fanbois and Wall Street shady types come running to buy the stock, the former because they believe him, the latter because they want to make a quick buck out of the former. His actions may not have been technically illegal but they were morally repugnant. Now legality may have caught up with him.

      • Jason Miller

        Not defending Musk. Just saying the world is sue happy.

  • LJ

    After watching Elon on Joe Rogan’s show, I know why he went with $420 😉

  • john1168

    How can someone who is so smart and innovative, do something so colossally stupid??? As soon as that tweet came out, the first thing I thought was, the SEC is gonna be all over Elon’s ass like a bad rash. Personally I think it’s extreme arrogance but who know’s… I just hope his Space X program doesn’t take a big hit. There are other companies who would love to substitute in but none of them are as far along as Space X.

    He’s gonna have a real hard time trying to prove his tweet wasn’t stock manipulation. It doesn’t matter if it was a joke, a social experiment, serious, or he was high as a kite while hittin a blunt. He said what he said, it affected the market and the SEC is gonna kick his ass over it. What a dumbass…

    • Vassilis

      Acid.

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