Letter to US judge overseeing 2018 settlement with the SEC, alleges the US financial regulator is harassing Tesla and Elon Musk
Tesla and Elon Musk this week have pushed back against the US Securities and Exchange Commission (SEC), and accused it of ‘unrelenting harassment’.
The accusations against the US financial watchdog came in a letter from Tesla and Elon Musk on Thursday, addressed to US District Judge Alison Nathan in Manhattan, Reuters reported.
Judge Alison Nathan in Manhattan presides over the 2018 SEC settlement stemming from Musk’s tweet about a potential buyout of Tesla.
Back in August 2018, Musk out of the blue tweeted that he was considering taking Tesla private and that he had secured funding to do so.
Musk was almost immediately hit with two lawsuits which alleged that Musk’s tweets were fraudulent effort to attack short sellers.
Then last November investment bank JPMorgan Chase also sued Tesla for $162 million, alleging Elon Musk’s privatisation tweet in 2018 cost it millions of dollars.
Those privatisation tweets brought Musk to the attention of the SEC, which accused Musk of securities fraud, and alleged he made a series of “false and misleading” tweets about potentially taking Tesla private.
Indeed, the SEC sued Tesla and sought to ban Elon Musk from acting as an officer or director of a publicly traded company.
In the end, the US financial regulator forced Musk to step down as chairman of Tesla and pay $20m in penalties.
Musk however was allowed to retain the CEO role.
Since then, Musk has had to submit any public statements (including tweets) about the company’s finances to vetting by its legal counsel before publishing them.
And it should be remembered that Musk did not exactly endear himself to the SEC after he publicly attacked the watchdog – on two occasions.
In December 2018 for example, Musk publicly admitted that he had “no respect” for the SEC.
And senior SEC officials were also not happy at Musk, feeling he got away lightly in the SEC agreement.
In May 2019 SEC commissioner Robert Jackson made clear he did not support the agreement reached between Musk and the SEC.
The tension between Musk and the SEC has continued since then .
Last June for example the SEC notified Tesla that two of Musk’s tweets from 2019 and 2020 – one about Tesla’s solar roof production volumes and one about the company’s stock price – hadn’t received the required pre-approval.
Against this fraught background, Musk and Tesla this week accused the SEC of harassing them with an “endless” and “unrelenting” investigation to punish Musk for being an outspoken critic of the government, Reuters reported.
“Mr. Musk and Tesla respectfully seek a course correction,” wrote Alex Spiro, a lawyer for Musk and Tesla in the letter to Judge Alison Nathan. “Enough is enough.”
In Thursday’s letter, Spiro accused the SEC of ignoring its commitment to distribute to shareholders the $40 million in fines, while instead “devoting its formidable resources to endless, unfounded investigations” into Musk and Tesla.
“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,” Spiro was quoted as writing by Reuters.
Spiro asked Judge Nathan to schedule a conference to find out why the SEC is “issuing subpoenas unilaterally” without court approval, and why the money isn’t being distributed.
The SEC declined to comment, Reuters reported.
In a one-sentence order, Judge Nathan directed the regulator to respond by 24 February.
Thursday’s letter escalates Musk’s battle with regulators and local authorities.
On 7 February Tesla disclosed it had received a subpoena from the SEC about its compliance with the 2018 settlement.
That latest subpoena was reportedly issued on 16 November, ten days after Musk had polled his Twitter followers on whether he should sell 10 percent of his Tesla stake, triggering a sell-off.
Tesla last week was hit with a lawsuit by California’s Department of Fair Employment and Housing, which alleged black workers were forced to tolerate racial discrimination at Tesla’s Fremont, California, factory.
Tesla called that lawsuit misguided.
The world’s most valuable car maker is also trying to reduce or dismiss an $137 million jury award to a black former elevator operator for subjecting him to a hostile work environment at the Fremont plant.