Tesla and Musk Settle for $40 Million with SEC over Musk’s Misleading Tweet
The U.S. Securities and Exchange Commission (“SEC”) filed a civil complaint on September 27, 2018 against Tesla’s Chief Executive Officer Elon Musk (“Musk”) for making false and misleading statement to investors. The SEC’s complaint focuses on a tweet that Musk sent out on August 7, 2018 in which he states that he is “considering taking Tesla private at $420” and that he had “funding secured” for this transaction. In the hours that followed his first tweet, Musk made a series of additional statements that the SEC alleges were also materially false and misleading. On September 29, 2018, the SEC settled the fraud charges against Musk and also resolved charges against Tesla. Among other remedies, the terms of the settlement require the following:
- Musk will step down as Tesla’s Chairman and be replaced by an independent Chairperson. Musk will be ineligible to be re-elected Chairman for three years;
- Tesla will appoint a total of two new independent directors to its board;
- Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications; and
- Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
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About Alex B. Heller
Alex B. Heller’s practice is focused on securities litigation. Alex is an associate in the firm’s Pennsylvania office.