US financial regulator files lawsuit against Telsa co-founder Elon Musk on grounds of securities fraud
The Securities and Exchange Commission (SEC) is taking lawful action against Tesla co-founder Elon Musk, investigating Musk’s claims over secured funding. The investigation will scrutinise complaints made against 'false and misleading' plans surrounding funds acquired to make the electric carmaker private.
The US financial regulator is seeking to remove Musk from his role as an officer and director of a publically traded company. Musk has called the action ‘unjustified’, explaining that he acted in the ‘best interests of truth, transparency and investors’.
'Integrity is the most important value in my life and the facts will show I never compromised this in any way,' the Tesla co-founder said in a statement.
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Tesla's board of directors said in a further statement that they were 'fully confident in Elon, his integrity and his leadership of the company'.
The automotive business sector was stunned with Musk’s announcement last month – via Twitter – to announce his plans to de-list Tesla from the stock exchange. He later clarified that he had ‘funding secured’ for the proposal; valuing Tesla at $420 per share.
However, there is speculation that this figure was something of a joke between Musk and his girlfriend, Canadian indie singer Grimes.
According to the SEC complaint: ‘he [Musk] rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price”.
Tesla shares skyrocketed after Musk’s announcement before he then retreated from further announcing plans amid public doubt and industry theory. His claims were debunked before Musk backed away from the plan, blaming investor feedback.
The SEC is seeking financial penalties with claims that Musk’s behaviour has harmed investors and created ‘significant confusion’ on the stock market.
'Taking care to provide truthful and accurate information is among a CEO's most critical obligations,' said Stephanie Avakian, co-director of the SEC's enforcement division.
'That standard applies with equal force when the communications are made via social media or another non-traditional form.'
The SEC complaint sent shares of the firm down by more than 10% in after-hours trade.