Writing business

Judge rejects Elon Musk’s bid to end SEC consent decree

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

Aly Song | Reuters

A federal judge has rejected Tesla CEO Elon Musk’s bid to end a settlement agreement he reached with the Securities and Exchange Commission after the agency charged him with securities fraud in 2018. The judge also denied Musk’s motion to quash a new SEC subpoena. .

In 2018, financial regulators accused Tesla and Musk of making “false and misleading” statements to investors when the CEO announced on Twitter that he was considering taking the automaker private at $420 a share and had “funding secure”.

Tesla’s stock price jumped more than 6% on August 7, 2018, and trading in Tesla was halted after Musk’s tweets that day. Shares of the electric vehicle maker have been volatile for weeks.

As part of a settlement agreement, Tesla and Musk each agreed to pay a $20 million fine. Musk also had to step down from his role as chairman of Tesla for 3 years and agreed not to claim innocence or deny the allegations in the SEC complaint.

Finally, Tesla and Musk agreed to have the CEO’s tweets checked by an experienced securities attorney before publishing them if they contained material business information that could impact Tesla’s share price. .

Argument of freedom of expression

However, Musk continued to use Twitter shamelessly.

For example, on November 6, 2021, it tweeted a poll of his tens of millions of social media followers, writing, “There’s been a lot of talk lately about unrealized gains as a tax avoidance measure, so I’m offering to sell 10% of my Tesla stock . Do you support this? And to add: “I will stick to the results of this poll, whatever the direction.”

After that, the SEC subpoenaed Elon Musk and his brother, Tesla board member Kimbal Musk, to try to determine whether the CEO was complying with the settlement agreement and whether the two were following other regulations on securities.

Through his lawyer Alex Spiro, Musk complained earlier this year in court that the SEC was trying to ‘muzzle and harass him’ with pending subpoenas, and trying to ‘chill’ his rights to the First Amendment by monitoring his use of Twitter.

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

Refuse

The judge presiding over the case, Judge Lewis J. Liman, dismissed Musk on both claims in a sharply worded opinion and order on Wednesday, April 27.

He dismissed Musk’s First Amendment arguments, writing, “Even Musk admits that his free speech rights do not allow him to engage in speech that is or could be ‘deemed fraudulent or otherwise contrary to human rights’. securities laws”. The consent decree therefore does not impose obligations that have “become inadmissible under federal law”.

He also noted that Musk had not sent a significant number of subpoenas and that the SEC was within its rights to request information from him.

The judge revealed he owned Tesla stock in 2020, however, CNBC confirmed he did not own Tesla stock when two cases related to Musk and Tesla were assigned to him in April this year.

Spiro, Musk’s attorney, told CNBC on Wednesday:

“Nothing will ever change the truth that Elon Musk was considering taking Tesla private and could have done so – all that remains about half a decade later are remaining litigation that will continue to make this truth more and more clearer.”