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Tesla stock sinks as Elon Musk is sued by SEC for securities fraud

posted onSeptember 28, 2018

The U.S. Securities and Exchange Commission (SEC) charged Tesla CEO Elon Musk with fraud, according to documents filed Thursday in Manhattan federal court. 

The SEC complaint alleges that Musk made a series of “false and misleading” tweets about potentially taking the automaker private last month which caused significant investor confusion and disrupted the market.

Among other remedies, the SEC is seeking to remove him from his role in charge of the electric car company and also ban him from serving as an officer of any public company if found guilty. There could also be fines involved. 

“Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price,that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote. In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source” the SEC,  the US’s top financial watchdog said.

Musk called the allegations "unjustified”. The entrepreneur said in a statement to CNBC: “This unjustified action by the SEC leaves me deeply saddened and disappointed. 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 stock took a dive in after hours trading Thursday in response to the news, tumbling 12 percent. That news also triggered lawsuits from investors. 

The Justice Department has reportedly also opened a criminal investigation into Musk’s tweets about the attempt to take Tesla private, a company with a market value of more than $50 billion, according to Bloomberg.

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