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US regulator accuses Elon Musk of fraud

September 27, 2018

Regulators have filed a suit against the electric-car manufacturer over a tweet he sent about taking Tesla private. The regulators want to bar him from running any public company.

Elon Musk
Image: Reuters/J. Skipper

Elon Musk has been accused of making false public statements that had the potential to hurt investors. He is one of the most high-profile executives to be accused by the Securities and Exchange Commission (SEC) of securities fraud.

The SEC seeks to have Musk barred from serving as an executive or director of publicly traded companies and to impose a civil fine and other remedies. The regulatory body does not have criminal enforcement power.

In the suit filed in New York on Thursday, the SEC said Musk "knew or was reckless in not knowing" that his statements were false or misleading. 

The Tesla showroom in New York City
The Tesla showroom in New York CityImage: Getty Images/S. Spencer

In August, Musk wrote to his 22 million Twitter followers that he had "funding secured" to take Tesla into private ownership at $420 (€360) a share, which caused Tesla's share price to rise sharply for a short period of time.

The 47-year-old South African, Canadian and US citizen then said he decided against the plan. Musk rejected the SEC's allegations.

"This unjustified action by the SEC leaves me deeply saddened and disappointed," he said in a statement. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."

Tesla remains a publicly traded company. The shares fell 10 percent in after-hours trading on Thursday to $277.50, a fall of 25 percent since the August tweet.

False and misleading

In its filing, the SEC said the August statements were "false and misleading" and Musk had never discussed the plans with company officials or potential funders. 

The SEC stated that Musk "knew that he had never discussed a going-private transaction at $420 per share with any potential funding source."

Tesla has been struggling in recent months to reach production targets for its electric cars. Musk has also given emotional statements to the media, including one when he appeared to smoke marijuana

Musk is founder and CEO of SpaceX and co-founder of PayPal, among other interests. He made no immediate comment on the SEC filing.

jm/sms (Reuters, AP)

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