Elon Musk, CEO of Tesla and SpaceX, has been charged with fraud by the Securities and Exchange Commission (SEC), according to CNBC. The agency says that an August tweet saying he had obtained funding to take Tesla private was “false and misleading.” They also say that Musk has failed to inform regulators of relevant information.
“In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the agency said in a complaint, which was filed Thursday in federal court.
Musk made the claims on Twitter on August 7th, and Tesla shares rose sharply after the announcement. The tweet read:
“Am considering taking Tesla private at $420. Funding secured.”
On August 24th, Tesla clarified that it would not, in fact, be going private.
Sources told CNBC that the company also expects to be sued, although they were not named as a defendant in Thursday’s court filing.
The SEC had already been investigating Tesla over its projections of car sales, and the Justice Department is separately investigating whether Musk has misled investors.
The complaint asks the court to prohibit Musk from acting as officer or director of a publicly traded company, and to impose fines, if he is found guilty.
Tesla shares fell 13 percent in extended trading Thursday, to 30 percent below the company’s 52-week high. Musk would lose control over Tesla, which he founded. If the issue is not resolved swiftly, investors will be left in doubt of whether will Tesla will continue to be led by a CEO who is central to the company’s public image.
During a press conference Thursday, the co-director of the agency’s enforcement division, Stephanie Avakian, said:
“A chairman and CEO of a public company has important responsibilities to shareholders. Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media. Neither celebrity status nor reputation as a technological innovator provide an exemption from the federal securities laws.”
Musk said he was “deeply saddened and disappointed,” and called the complaint “unjustified,” adding:
“Integrity is the most important value in my life and the facts will show I never compromised this in any way.”