US Regulators Sue Tesla's Musk for Fraud, Seek to Bar Him as Officer
U.S. securities regulators on Thursday accused Tesla Inc. Chief Executive Elon Musk offraud and sought to ban him as an officer of a publiccompany,saying he made a series of "false and misleading" tweets aboutpotentially taking the electric car company private last month.
Musk, 47, is one of the highest-profile tech executives tobe accused of fraud by the Securities and Exchange Commission.
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Losing its public face and guiding force would be a big blow formoney-losing Tesla, which has a market value of more than $50billion, chiefly because of investors' belief in Musk'sleadership.
Tesla shares tumbled 12 percent in after-hours trading. Company officials werenot immediately available for comment.
The SEC's lawsuit, filed in Manhattan federal court, came less than two months after Musk told his more than 22 millionTwitter followers on Aug. 7 that he might take Tesla private at$420 per share, and that there was "funding secured."
"Neither celebrity status nor reputation as a technologicalinnovator provides an exemption from federal securities laws,"Stephanie Avakian, co-director of enforcement at the SEC, told anews conference announcing its chargesagainst Musk.
Musk has long used Twitter to criticize short-sellersbetting against his company, and already faced several investorlawsuits over the Aug. 7 tweets, which caused Tesla's shareprice to gyrate.
According to the SEC, Musk "knew or was reckless in notknowing" that his tweets about taking Tesla private at $420 ashare were false and misleading, given that he had neverdiscussed such a transaction with any funding source.
The SEC said he also knew he had not satisfied othercontingencies when he declared unequivocally that only ashareholder vote would be needed.
Thursday's complaint also seeks to impose a civil fine andother remedies. The SEC does not have criminal enforcementpower.
On Aug. 24, after news of the SEC probe had become known,Musk blogged thatTesla would remain public, citing investor resistance.
