By Esmée Hardwick-Slack
The US Securities and Exchange Commission (SEC) is suing the Tesla Inc Chief Executive Elon Musk, accusing him of securities fraud.
It says that Musk claimed he has secured funding to take the company private were “false and misleading”, confusing investors by telling his 22 million Twitter followers that he might take the company private at $420 per share, and that there was “funding secured”.
A subsequent tweet from Musk stated “investor support is confirmed” and a “special purpose fund” could be created for investors who stay with the company.
The lawsuit seeks to bar Musk from acting as an officer or director of a publicly traded company, which would include Tesla Inc.
Co-Directors of the SEC’s Enforcement Division, Steven Peikin, has 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”.
In recent months, Elon Musk’s behaviour has been in the spotlight quite a lot. In July, he was criticised for accusing a British diver involved in the rescue of the Thai teenagers from a flooded cave of being a child abuser. He also drew attention after an emotional interview with the New York Times, in which he said he works “120-hour weeks” and took sedatives. And earlier this month, he smoked marijuana live on the web during a podcast with comedian Joe Rogan.
Musk has responded to the lawsuit, calling the action “unjustified” and saying he acted in the “best interests of truth, transparency and investors”.
In his statement he said “Integrity is the most important value in my life and the facts will show I never compromised this in anyway”.
Joseph Grundfest, former SEC commissioner, said Musk will likely want to avoid going to trial on the case and opening the door to “a lot of testimony about his state of mind.”
Grundfest said that there are many potential ways in which this case could be settled, including one where Musk stays as CEO but this would likely mean putting some constraints on Musk.
“One possibility could be to appoint someone as a monitor over all of his communications. He wouldn’t be able to tweet or post anything directly without the approval of a chaperone.
“He is not going to be able to remain CEO with no conditions. That is not on the table.”
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