Elon Musk’s legal representative in a lawsuit brought by the Securities and Exchange Commission (SEC) has submitted a letter at the New York Southern District Court, which makes some rather bold accusations regarding the SEC’s conduct.
Let’s recall that, back in September 2018, the SEC announced that Elon Musk has agreed to settle the securities fraud charge brought by the SEC against him. The SEC also charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle.
According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.
The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.
Now, according to the letter signed by Alex Spiro, a representative of Elon Musk, the SEC is accused of failing to comply with its promise to pay Tesla’s shareholders the $40 million it collected as part of the settlement in these cases and that it purports to be holding for them.
Instead, according to the defendants, the SEC has been devoting its formidable resources to endless, unfounded investigations into Mr Musk and Tesla.
The letter states:
“Without coming before this Court, it has been weaponizing the consent decree by using it to try to muzzle and harass Mr. Musk and Tesla, while ignoring its Court-ordered duty to remit the $40 million that it continues to hold while Tesla’s shareholders continue to wait. Worst of all, the SEC seems to be targeting Mr.Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government; the SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion”.
Here, the SEC has been in possession of funds owed to Tesla investors for more than 1,200 days, and it has yet to announce anything like a distribution plan, the letter says.
The SEC is accused of being “more than energetic in going after Mr. Musk and Tesla, largely to police Mr.Musk’s public pronouncements via Twitter“.
Mr. Musk and Tesla seek a course correction.
The Letter about SEC’s conduct
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