On Sept. 27, the Securities and Exchange Commission (SEC) charged Tesla’s CEO and Chairman, Elon Musk with securities fraud. This action followed Musk tweeting out several different posts on Twitter claiming that he would be taking Tesla, Inc. private.
Musk’s actions began Aug. 7, when he posted a Tweet indicating that Tesla would be going private and selling at $420 per share. This price was far higher than the price it was publicly trading at, and in response, the stock’s price jumped by over 6 percent. The market disruption that followed caught the SEC’s attention, especially because his claim of having secured funding for the move turned out to be untrue. This spurred an investigation by the federal agency and gave strength to a corresponding securities fraud class action being filed by the company’s shareholders.
Speaking of the investigation, Steven Peikin, Co-Director of the SEC’s Enforcement Division, said, “Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders. An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.” Echoing those thoughts was Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, who said, “Taking care to provide truthful and accurate information is among a CEO’s most critical obligations. That standard applies with equal force when the communications are made via social media or another nontraditional form.”
The claim against Musk accuses him of having violated antifraud provisions of federal securities laws. In response to his actions, the agency is requesting civil penalties, prohibition of Musk serving as an officer or director of a public company, and a federal injunction stopping him from taking similar actions in the future. The evidence submitted in the SEC’s actions indicates that their investigation revealed that his claims “were premised on a long series of baseless assumptions and were contrary to facts that Musk knew.”
Concurrent with the SEC investigation, shareholders filed a private securities fraud class action, which it is believed will be strengthened by the facts submitted by the agency. Though private plaintiffs do not have the ability to obtain discovery from those they accuse of fraud until after several stages of legal action have been completed, they are able to use the public information that the SEC gathered for its own purposes and revealed in its public complaint, including testimony from Elon Musk himself.
If you are facing charges from the SEC regarding securities fraud, Bochetto and Lentz can provide you with an aggressive defense that protects your rights. Contact us today.