SEC sues Musk for securities fraud
Posted: Fri Sep 28, 2018 12:17 amYesterday, the SEC filed a complaint to the Federal District Court in the Southern District of New York.[1] It argues that
And that
It then asks for a final judgement finding that Musk violated federal securities fraud, restrain him from doing so in the future, pay civil penalties, bar him from serving on any company which is registered with the SEC (e.g. all public companies), etc.[4]
This seems very open and shut to me. SEC argues its case quite clearly. I'm most familiar with the outcome that came from SEC actions in the Theranos case, in which Holmes was ordered to pay penalties, give up all her shares (though, quite different from Tesla in this case), be barred from serving as an officer in any public company, and relinquish voting control of her shares.[5] I'd expect Musk to settle on similar, but more generous, owing to the fact that Tesla is not 100 per cent fraud like Theranos, grounds. Thoughts?
Corroborating coverage can be found here:
– Bloomberg: https://www.bloomberg.com/news/articles ... t-jml0ca0m
– CNN Money: https://money.cnn.com/2018/09/27/techno ... index.html
– NY Times: https://www.nytimes.com/2018/09/27/busi ... tesla.html
Update
[1] Filing can be found here: https://www.courtlistener.com/recap/gov ... 55.1.0.pdf . Hereinafter referred to as Complaint.
[2] Complaint p 1 para 1
[3] Complaint p 21 para 79
[4] Complaint pp 21–23
[5] https://www.sec.gov/news/press-release/2018-41
This case involves a series of false and misleading statements made by Elon Musk, the Chief Executive Officer of Tesla, Inc. (“Tesla”), on August 7, 2018, regarding taking Tesla, a publicly traded company, private. 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.[2]
And that
Defendant, with scienter, [ed. that is, knowledge of his actions,] in connection with the purchase or sale of securities as set forth above, directly or indirectly made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading by the use of the means or instrumentalities of interstate commerce, and of the mails, and the facilities of a national securities exchange.
By reason of the foregoing, Defendant violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act, [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder, [17 C.F.R. § 240.10b-5].[3]
By reason of the foregoing, Defendant violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act, [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder, [17 C.F.R. § 240.10b-5].[3]
It then asks for a final judgement finding that Musk violated federal securities fraud, restrain him from doing so in the future, pay civil penalties, bar him from serving on any company which is registered with the SEC (e.g. all public companies), etc.[4]
This seems very open and shut to me. SEC argues its case quite clearly. I'm most familiar with the outcome that came from SEC actions in the Theranos case, in which Holmes was ordered to pay penalties, give up all her shares (though, quite different from Tesla in this case), be barred from serving as an officer in any public company, and relinquish voting control of her shares.[5] I'd expect Musk to settle on similar, but more generous, owing to the fact that Tesla is not 100 per cent fraud like Theranos, grounds. Thoughts?
Corroborating coverage can be found here:
– Bloomberg: https://www.bloomberg.com/news/articles ... t-jml0ca0m
– CNN Money: https://money.cnn.com/2018/09/27/techno ... index.html
– NY Times: https://www.nytimes.com/2018/09/27/busi ... tesla.html
Update
- Judge has set date for initial pre-trial conference: viewtopic.php?p=34692319#p34692319 , to take place on 1 February 2019.
[1] Filing can be found here: https://www.courtlistener.com/recap/gov ... 55.1.0.pdf . Hereinafter referred to as Complaint.
[2] Complaint p 1 para 1
[3] Complaint p 21 para 79
[4] Complaint pp 21–23
[5] https://www.sec.gov/news/press-release/2018-41
