SEC charges Tesla CEO Elon Musk with fraud

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SEC charges Tesla CEO Elon Musk with fraud

The SEC says its investigation is continuing. The full complaint lays out a convincing timeline that alleges a lot of misdirection and misinformation being willfully passed around, all of it revolving around Musk.

But Stephanie Avakian, the SEC's co-director of enforcement, told reporters that Mr Musk knew his statements lacked any basis in fact.

"I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving", Musk wrote at the time.

"Musk's false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors", the SEC said in its suit, adding that Musk engaged in "manipulative and deceptive practices".

That news sent shares soaring.

For his part, Musk has issued a statement via Tesla stringently denying all allegations, asserting that he believed he had the funding secured at the time of the tweet.

The SEC's suit, filed in federal district court, alleges that Musk violated antifraud provisions of federal laws, and wants a "permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company".

On August 24, the company announced it would not become a private company as Musk said it would be too "time-consuming and distracting". Tesla is, of course, a publicly-traded company.

Musk also tweeted that he had "funding secured" for such a deal and that the only step left in the process was getting investor approval. The SEC charge may the door to a massive class-action lawsuit against Tesla itself, the damages could easily be seen to mount into the billions.

If federal investigators find that Musk was intentionally trying to cost them money, he could face criminal charges, securities lawyers have said. He's viewed by many shareholders as the leader and brains behind Tesla's electric vehicle and solar panel operations.

In a lawsuit, the regulator said Musk surprised members of his own team and investors with a series of tweets, starting with the August 7 announcement that he was thinking oftaking Tesla private.

Daniel Sparks owns shares of Tesla.

This understanding was again echoed by SEC leadership and officials in a news conference about the lawsuit.

Spiegel also echoed the concerns of corporate governance experts who have lambasted Tesla's board for being too beholden to a CEO that they are supposed to oversee.

At the time of publication, Tesla shares were down almost 12 percent in after-hours trading. As evidence, the complaint notes that within minutes of the first tweet, the head of investor relations at Tesla texted Musk asking if the tweet was legitimate.

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