Tesla Inc. CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) on August 29, 2019 in Shanghai, China.
Aly Song | Reuters
A federal judge has rejected Tesla CEO Elon Musk’s offer to terminate 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 request to vacate a more recent subpoena from the SEC.
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 privatizing the automaker for $420 a share and “secured funding.” ” may be.
Tesla’s stock price rose over 6% on Aug. 7, 2018, and Tesla trading halted following 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 agreed to pay a $20 million fine each. Musk was also forced to step down from his role as CEO of Tesla for 3 years and agreed not to plead innocent or to dispute the allegations in the SEC lawsuit.
Eventually, Tesla and Musk agreed to have the CEO’s tweets reviewed by an experienced securities attorney prior to publication if they contained material business information that would likely affect Tesla’s stock price.
Free Speech Argument
However, Musk continued to use Twitter unabashedly.
For example, on November 6, 2021, he tweeted a poll to his tens of millions of followers on the social network, writing: “There’s been a lot of talk lately that unrealized gains are a measure of tax avoidance, so I’m proposing to sell 10% of mine.” Tesla stock. Do you support that?” Adding, “I will stand by the results of this poll, whatever the outcome.”
After that, the SEC subpoenaed Elon Musk and his brother Kimbal Musk, who is a Tesla board member, to determine whether the CEO complies with the settlement agreement and whether they both comply with other securities regulations.
Musk, through his attorney Alex Spiro, complained to the court earlier this year that the SEC was trying to “muzzle and harass” him with ongoing subpoenas and was trying to protect his First Amendment rights by overseeing his use of Twitter ” to prevent”.
The Tesla and SpaceX chief sought to terminate the “Twitter sitter” agreement, a slang term for the consent decree, and asked the court to overturn parts of the SEC’s subpoena.
denied
The trial judge, Judge Lewis J. Liman, dismissed both requests for Musk in a strongly worded opinion and order on Wednesday, April 27.
He dismissed Musk’s First Amendment arguments, writing, “Even Musk acknowledges that his right to free speech does not permit him to engage in speech that ‘is considered fraudulent or otherwise violates securities laws.’ As such, the Consent Order does not impose any obligations that have ‘become federally impermissible’.”
He also noted that Musk did not file an incriminating number of subpoenas and that the SEC had its right to seek information from him.
The judge announced that he owned Tesla stock in 2020, but CNBC confirmed that he did not own Tesla stock at the time he was assigned two cases involving Musk and Tesla in April of this year.
Spiro, Musk’s attorney, told CNBC on Wednesday:
“Nothing will ever change the truth that Elon Musk considered taking Tesla privately and could have – all that remains about half a decade later is lingering litigation that will make that truth clearer and clearer. “