As an Amazon Associate I earn from qualifying purchases

Elon Musk tries to get out of settlement with SEC, says he was “forced” into it

Elon Musk standing and gesturing with his hands while he speaks at a press conference.
Enlarge / Elon Musk at a press conference at SpaceX’s Starbase facility in Texas on February 10, 2022.

Tesla CEO Elon Musk today asked a federal judge to terminate a 2018 settlement with the Securities and Exchange Commission, saying he’s tired of the SEC using the consent decree to “micro-manage” his Twitter activity and that he was “forced” into signing the deal. Musk also wants the court to quash an SEC subpoena that seeks documents related to whether he got pre-approval before posting a recent tweet about Tesla stock sales.

“Unlike other consent decrees, the SEC interprets the agreement in this case to permit it to micro-manage Mr. Musk’s Twitter activity,” according to Musk’s memorandum of law supporting his motion to quash the subpoena and terminate the consent decree. “Indeed, the SEC believes it may police speech that falls outside the bounds of Section 10(b) of the Securities Exchange Act of 1934, which prohibits fraud in the purchase or sale of securities and statements or omissions of material fact.”

The 2018 settlement required Tesla to impose controls on Musk’s social media statements. The settlement was reached to resolve the SEC’s complaint that “Musk’s misleading tweets” about taking Tesla private caused the stock price to jump “and led to significant market disruption.” Musk and Tesla also each agreed to pay $20 million in penalties.

Musk: “First Amendment freedoms are imperiled”

Musk claimed that “the consent decree should be terminated because compliance with it has become impossible under the SEC’s skewed conception of its authority.” The filing in US District Court for the Southern District of New York continued:

Nothing less than First Amendment freedoms are imperiled. The more the SEC monitors Mr. Musk’s Twitter activity, and forces others to do the same, the more Mr. Musk’s freedom of expression is infringed.

Musk’s filing said an SEC subpoena to Tesla on November 16, 2021, “seeks information relating to whether Mr. Musk sought and obtained approval from Tesla before he posted the November 6, 2021 tweets.” That’s a reference to Musk polling Twitter users about whether he should sell 10 percent of his Tesla stock. The SEC issued a similar subpoena to Musk on November 29, demanding that he “produce documents pertaining to (1) the review or pre-approval of statements he posted on Twitter and (2) his sale of Tesla stock or options,” Musk’s filing said.

Musk’s brother—Kimbal Musk, who serves on Tesla’s board of directors—sold Tesla shares valued at $108 million one day before the Twitter poll. An SEC insider-trading investigation is reportedly examining whether Elon Musk told his brother about the Twitter poll in advance. Musk’s filing says that “the SEC has used its subpoena power to continue investigating matters that were subject to settlements and then serially to start new investigations with no end in sight.” The filing then mentions in a footnote that the SEC leaked information about the insider-trading investigation to the press.

Musk is seeking an order stating that the November 29 subpoena “exceeds the investigatory power of the Commission and was issued in bad faith.” Musk argued that his poll was a way to gather information and “not a disclosure of information, much less information a company would have to report in SEC filings.” The poll “tweets did not include any information that Tesla would be required to disclose under the securities laws,” his court filing said.

Musk: “I never lied to shareholders”

In the August 2018 tweet that led to the complaint and settlement, Musk said he was “considering taking Tesla private at $420” and that he had secured funding. The SEC alleged that “Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact.”

In another filing today, Musk wrote, “I never lied to shareholders. I would never lie to shareholders. I entered into the consent decree for the survival of Tesla, for the sake of its shareholders.” Musk told the court that “the SEC’s unrelenting regulatory pressure, combined with the attendant collateral consequence of the SEC’s complaint against me, caused a scenario in which I was forced to sign the consent decree in 2018.”

Judge rejected Tesla’s previous request

Tesla and Musk last month told US District Judge Alison Nathan that the SEC is “weaponizing” the 2018 settlement to muzzle Musk’s criticism of the government. They claimed that the SEC cannot issue subpoenas related to compliance with the settlement “without Court approval.” Nathan denied Tesla and Musk’s request for action, saying the request wasn’t specific enough.

“[T]o the extent that the Defendants have a non-frivolous basis to quash a subpoena in light of the Court’s prior orders in this case, the Defendants may make a motion, supported by briefing, that requests specific relief from the Court,” Nathan wrote on February 24.

Musk’s request today was more specific than the previous one that was denied, and he is seeking an oral argument on the motion.

Source link

We will be happy to hear your thoughts

Leave a reply

Enable registration in settings - general
Compare items
  • Total (0)
Shopping cart