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SEC Charges Elon Musk With Fraud Over His Statements To Take Tesla Private (bloomberg.com) 412

U.S. securities regulators have sued Elon Musk for allegedly making false statements related to his abandoned efforts to take Tesla Motors private. Bloomberg News broke the news Thursday, citing docket entry in Manhattan federal court. Last month, Musk had expressed his intentions to take Tesla private, and that he had secured the funding. Taking Tesla private, which would have helped the company avoid making short-term commitments and goals, would be the "best path forward," Musk had said at the time. Even as investors had shown agreement to Musk's move, a few days later, he announced that after further discussions, everyone believes that Tesla should remain public. Amid all of this, some argued that Musk made the "false" claim just to hurt short-sellers. From the lawsuit: 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. During a press conference, Stephanie Avakian, co-director of the SEC's division of enforcement, said: A chairman and CEO of a public company has important responsibilities to shareholders. Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media. Neither celebrity status nor reputation as a technological innovator provide an exemption from the federal securities laws. In a statement to CNBC, Musk said, "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."
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SEC Charges Elon Musk With Fraud Over His Statements To Take Tesla Private

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  • by Mr. Dollar Ton ( 5495648 ) on Thursday September 27, 2018 @04:27PM (#57386408)

    It was probably more an act of stupidity under influence than a premeditated attempt at a short squeeze, but if you're wearing the CEO hat, you have less leeway for stupidity.

    So, fraud charges secured.

    • by Rei ( 128717 ) on Thursday September 27, 2018 @04:33PM (#57386470) Homepage

      Slashdot article is wrong. It's only against Musk, not Tesla [pacermonitor.com]. As longs have been pointing out for ages that it would be, while shorts kept insisting it would be against Tesla. He's also not been charged, he's been sued, in a civil case. "Civil Action No. 1:18-cv-8865"

      But come on people, get that price down! I've got dry powder and it's right before the Q3 deliveries numbers ;)

      • by mlyle ( 148697 )

        1. Does TSLA indemnify Musk? They probably do indemnify O&D's, so ...
        2. They're seeking to bar him. On the other hand, this may just be a ploy / tactic to encourage prompt settlement.
        3. Probably the worst thing: this makes it pretty hard for the foreseeable future for TSLA to access capital markets, should it be required.

        • The SEC probably sees #3 as leverage to settle quickly. The longer this goes on, the more damage it does.

          • by rtb61 ( 674572 ) on Friday September 28, 2018 @01:32AM (#57388592) Homepage

            Reality, a corrupt hedge fund, paid a corrupt lobbyist, to buy SEC action. CEO can tweet pretty much anything, it is not a company press release. Normal SEC role, would be to request a confirmation as a company press release (investors should pay far more attention to company press releases than to CEO tweets).

            As a company press release, you claim funding has been provided there better be there, as a CEO with a tweet, you claim funding is available, any one can provide that letter. So he goes to his favourite bank manager and asks for a letter saying they would have (heh heh) provided funding and the SEC looks as stupid as fuck. As a last ditch super lame effort, they claim the letter is after the action, as a retort, yeah, we did a verbal and a handshake (100% legally binding in the eyes of the court). The SEC, well, the particular stooge who fronted the case, might well lose their job because Tesla can counter claim that the only reason prosecution was brought was to actively seek to damage the share price to favour the shorts and well, demand an FBI investigation to find the lobbyists and the hedge fund manager doing the shorting.

            The SEC in this case is doing far more to try to damage the price of Tesla in favour of the hedge funds doing the shorting, on purpose, then Musk did with his tweet ie the SEC has launched a court case to specifically cripple Tesla share price affecting all investors compared to a fucking tweet only affecting hedge funds doing shorts and guess fucking what, protecting all other Tesla investors.

            So who is guilty of the greater stock price manipulation, Elon Musk or the SEC (the unknown lobbyist and hedge fund managers shorting the stock), obviously not Tesla, so guess who will have the case tossed and guess who will be facing major ramifications.

            • Re: (Score:3, Insightful)

              by Anonymous Coward

              CEO can tweet pretty much anything, it is not a company press release.

              From the complaint:

              On November 5, 2013, Tesla publicly filed a Form 8-K with the Commission stating that it intended to use Musk's Twitter account as a means of announcing material information to the public about Tesla and its products and services and has encouraged investors to review the information about Tesla published by Musk via his Twitter account.

              How do you like them apples?

        • by LynnwoodRooster ( 966895 ) on Thursday September 27, 2018 @05:35PM (#57386922) Journal
          Given the Tesla burn rate, they need access to that capital in the next few months. They cannot let it drag on past November. Stock issues typically have 30 to 90 days requirements on announcement, meaning that if Telsa is burning capital at the rate it's been burning, they'll be out of cash around February 2019. So if they have a 90 day announcement period for more stock sales, they would need to announce by the end of October. Having yourself locked down at that time is basically a death sentence.
      • Slashdot article is wrong. It's only against Musk, not Tesla

        It appears to have since been edited to correct this error. When I first loaded this article, the HTML title element was

        SEC Charges Elon Musk With Fraud Over His Statements To Take Tesla Private - Slashdot

        but its headline was (with my emphasis of those words that differed)

        SEC Charges Tesla, Elon Musk With Fraud Over His Statements To Take Company Private

        I reloaded again and the new title also appeared as the headline. This calls to mind both of Phil Karlton's two hard problems in computer science: cache inv

        • by Rei ( 128717 )

          They still incorrectly state "charges". They've sued Musk in a civil case.

          • by mlyle ( 148697 )

            The phrase "civil charges" is in wide use, including by the SEC: https://www.sec.gov/news/press... [sec.gov]

            I agree with laypeople it carries the connotation of criminal charges.

          • Re: (Score:2, Interesting)

            They still incorrectly state "charges". They've sued Musk in a civil case.

            So? You can sue criminals for crimes in a civil case if the prosecution declines to engage in a criminal case.

            I've done this in the past with an ex-wife who kept obstructing my son's access to me: the prosecutor basically blew me off and said deal with it, so I filed a civil suit seeking a finding of guilt of a crime.

            She got a 3 month sentence (contempt of the visitation order), plus the opportunity to pay me back my legal fees.

            You aren't as clued up as you think you are. You're very passionate about Tesla

      • by lgw ( 121541 )

        But come on people, get that price down! I've got dry powder and it's right before the Q3 deliveries numbers ;)

        I was thinking the same. Personally, I wouldn't buy TSLA above 300, but I'd love a nice overreaction tomorrow morning.

      • by Mr. Dollar Ton ( 5495648 ) on Thursday September 27, 2018 @05:02PM (#57386700)

        This is a very subtle distinction, as Mr. Musk is Tesla for all practical purposes - he's the face, the chief salesman and the chief reality distortion wizard there. Without him, Tesla, Inc. would have folded long ago.

        Also, it is quite possible that more charges will be filed. This is likely the first action, not the last. The outpour of executives in the last few weeks virtually guarantees it.

        I don't expect you to admit that Mr. Musk's behavior is utterly irresponsible, but that's what it is.

        • by jeff4747 ( 256583 ) on Thursday September 27, 2018 @05:31PM (#57386892)

          Also, it is quite possible that more charges will be filed. This is likely the first action, not the last.

          You generally don't start with the smallest possible action when you are planning more than one.

          • It depends on what the goals of SEC are, and what is the time frame they want to achieve them in. SEC may want to correct the problem of Musk making random untrue statements first and fast, thus eliminating his impact on the stakeholders, and then proceed with any other actions.

            I doubt it very much that the goal of SEC is to destroy an American company, supported by a bunch of institutional investors. But if there is evidence of more serious violations, it may lead to more action, including criminal charges

            • It depends on what the goals of SEC are, and what is the time frame they want to achieve them in

              There is not a long line in front of the "file criminal charges here" clerk. Civil charges are not particularly slow to file.

            • I doubt it very much that the goal of SEC is to destroy an American company, supported by a bunch of institutional investors.

              Quite possibly the goal is to save an American company from a crackpot founder. We don't need Tesla to become the next Tucker.

      • Slashdot article is wrong. It's only against Musk, not Tesla [pacermonitor.com].

        Problem is, and as clearly stated in the complaint you linked, one of the remedies the SEC is seeking is "that Defendant be prohibited from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. 78l] or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. 78o(d)]."

        In other words, Musk wouldn't be able to be a director/officer of Tesla anymore.

        That could be one itsy bitsy reason why Te

        • That could be one itsy bitsy reason why Tesla stock is tanking.

          Also, that he shows up on a video podcast smoking weed.

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        Slashdot article is wrong. It's only against Musk, not Tesla [pacermonitor.com]. As longs have been pointing out for ages that it would be, while shorts kept insisting it would be against Tesla. He's also not been charged, he's been sued, in a civil case. "Civil Action No. 1:18-cv-8865"

        But come on people, get that price down! I've got dry powder and it's right before the Q3 deliveries numbers ;)

        Sued is worse than criminal charges. If found guilty, and given that this happened in a public forum, he will be, the SEC has the potential to ban him from running a public company, just like they did to Elizabeth Holmes. In addition, they can fine him sufficiently high enough to force him to sell Tesla stock to meet the fine, if he doesn't then he goes to prison in contempt of court. The result is the SEC has the power to remove him from Tesla completely.

        And despite your corrections, Tesla has had 3 cla

        • by arth1 ( 260657 )

          Sued is worse than criminal charges. If found guilty, and given that this happened in a public forum, he will be, the SEC has the potential to ban him from running a public company, just like they did to Elizabeth Holmes. In addition, they can fine him sufficiently high enough to force him to sell Tesla stock to meet the fine, if he doesn't then he goes to prison in contempt of court. The result is the SEC has the power to remove him from Tesla completely.

          It wouldn't be the first or second time Musk's ousted from a company he started. Zip2 and Paypal both gave him a swift kick in the posterior. There might be Reasons.

          The difference is that if the SEC suit succeeds, he can be barred him from holding a leadership position in any traded company.

      • by RhettLivingston ( 544140 ) on Thursday September 27, 2018 @05:46PM (#57386988) Journal

        I'm honestly not sure how to play those delivery numbers now. I was fixing to jump in for the expected 10% plus jump (trader here, no long investments with a recession in the wind). But, I'm in the camp that believes that Tesla without Musk at the helm will be just another car company instead of a company headed for a full vertical stack business in Transportation as a Service that is the only thing that can justify it being amongst the highest valued companies. To be valued in the $50+ billion range at this point in its life can only be justified by an expectation of a value that is a multiple of the top car company in the world in the decade out time frame because values don't stay flat while the company grows to its target.

        Without his dynamism, they may not fail, but they will only succeed in having sparked the transition to electric, not in the more far-reaching task of rewriting the automotive business model which likely has another 15 years to critical mass. He also badly needs a Tesla worth several times more than today to gain the finances he'll need for Mars at about that same 15 year time frame. He needs a Tesla providing a few hundred billion miles a year of TaaS.

        The SEC has to be very careful here because in punishing Musk for a 10% increase that hurt a few minority shorts, they could spark a 50%+ decrease that would be of far greater total monetary harm to the majority longs.

        Many of the older, calmer investment experts I've read comment on this battle from the POV of experience say that the SEC will talk big but balance what they do to Musk with concern for their own potential of causing more damage than the momentary glitch Musk caused. 10% increases and decreases in Tesla are an expected norm. I personally consider the stock to be unchanged from a long-term POV as long as it stays between about 250 and 370. It is that volatile.

        • by LynnwoodRooster ( 966895 ) on Thursday September 27, 2018 @05:52PM (#57387028) Journal

          The SEC has to be very careful here because in punishing Musk for a 10% increase that hurt a few minority shorts, they could spark a 50%+ decrease that would be of far greater total monetary harm to the majority longs.

          That's not the result of the SEC - that's the result of Musk's actions. Commit fraud, you get busted and probably removed from leadership of your company - which will probably tank the stock. That's entirely on Musk trying to be cool for his girlfriend ($420 - get it, 420!) and attack the shorts. The SEC isn't responsible for the harm for the longs - Musk is.

          • Certainly. But the SEC has a history of being practical more often than not. Whether Musk initiated the harm or not, they have the choice of limiting the harm or not. They do not serve the majority of the stockholders in not exercising those choices wisely.

            Just as suicide by cop does not serve justice and most cops try to avoid participating in it if they can, the SEC will likely try to avoid being the instrument of a much greater destruction (at least 10-fold the losses in my estimates) than has already oc

        • he SEC has to be very careful here because in punishing Musk for a 10% increase that hurt a few minority shorts, they could spark a 50%+ decrease that would be of far greater total monetary harm to the majority longs.

          Whoa there hoss. The SEC isn't punishing him because he hurt a minority of shorts - they're punishing him because he broke SEC regulations.

          And frankly, anyone in a long position who expects TSLA to remain at it's current value is dancing on a knife edge because it's current value is a nothing

      • Well yes, but the distinction between sued and charged may be kind of academic. One of the remedies suggested/demanded in the suit would be to bar Musk from acting as an officer or director or officer of a publicly traded company. I wonder if they are serious or if that is some sort of negotiating chip.

        If nothing else, I would think this might serve as a warning to CEOs to be a bit careful about what you tweet. That's possibly what the SEC had in mind. It's also possible that they'd informally warned Mu

      • Liberals would like to whip this up into the American version of Kaupthing. Just watch.

    • You can just look at Elon Musk's previous tweets and public communications to see that he tends to get excited about things and make promises or statements about them that are a bit optimistic.

      I have no reason to believe what happened here was a snap decision on his part that going private would be a really good thing for Tesla in the long-haul. And when he got word that some of the folks in Saudi Arabia were about to dump serious money into investing in an EV, he made a bet they were referring to HIS compa

    • by Archfeld ( 6757 )

      Hmmm but apparently it doesn't apply to wearing the hat of the CEO of a country or in advertising for said company.

    • Conspiracy Theory:

      Funding at 420 fell through because it was too much money.
      Musk starts talking about child rapist again, acts a bit more erratic, now this SEC lawsuit.
      Telsa stock drops.
      It's no longer too much money to take Tesla private.

    • by mark-t ( 151149 )

      The legal definition of fraud requires that there exist some evidence to indicate intent to trick, deceive, or be dishonest.

      Legally speaking, you cannot commit fraud unintentionally.

      Now you could argue that his carelessly saying such a thing could constitute gross negligence to his obligations as CEO, but that's not the same thing as fraud.

  • NYT says: [nytimes.com]

    The lawsuit, filed in federal court in New York, seeks to bar Mr. Musk from serving as an executive or director of publicly traded companies. Tesla, which Mr. Musk co-founded, is publicly traded.

    • I had to laugh at all the Musk fanboys here saying at the time that he committed no crime. Yes he did, you can't do such things when a public company.

      • by Ionized ( 170001 )

        you can't LIE about such things as a public company.

        if he'd actually had the funding secured, which was entirely plausible, he'd have been in the clear.

        • correct, and all he had to do was show proof of talks... quite surprised he had nothing for SEC, you'd think a couple drinking (or bong hitting) buddies would agree to back claim...

  • Comment removed (Score:5, Interesting)

    by account_deleted ( 4530225 ) on Thursday September 27, 2018 @05:15PM (#57386794)
    Comment removed based on user account deletion
    • by Thelasko ( 1196535 ) on Thursday September 27, 2018 @05:46PM (#57386992) Journal

      I honestly can't think of a worse group of folks than financial lawyers, or a better group of people than SpaceX.

      I'm not worried about SpaceX.

      1. This suit seeks to keep Musk from heading public companies. SpaceX is privately held.
      1. Gwynne Shotwell seems to be more than capable of running SpaceX.

      However, Tesla may be screwed.

      • "SpaceX is privately held"

        Indeed. Problem is that if and when the investors decide to take the company public, they may have to eject Musk. If they don't take the company public they might be forced to deal with the spectre of having to live off the profits instead of walking away with a bloated payoff when the IPO yields twice what the company is actually worth. This is NOT the approach that made American great..

    • This case is specifically aimed at Musk, not the companies. The companies are doing quite fine(ish). Tesla is just hitting every single brick wall that every other car company over the last umpteen decades has hit. So I guess they're notoriously bad at history.

    • Yes, let's just trash our home and then move out. Maybe leave an overturned car and some dead appliances stuffed with garbage in the yard, and abandon a few mangy dogs under the porch, too. If that's all the better humanity can do, then I hope we go extinct right here where we are.

    • Wouldn't it be delicious if this derailed humanity's path to the stars long enough that we didn't make it as a species?

      I honestly can't think of a worse group of folks than financial lawyers, or a better group of people than SpaceX.

      I'm not sure I get your argument.

      It sounds like you're fine with him committing securities fraud because he's CEO of a company doing cool things.

  • ...it seemed like a bait to try get Apple to buy him out. He's getting bogged down with Tesla and really wants to liquidate and concentrate on SpaceX. Sadly for everyone it didn't work.

  • Comment removed (Score:5, Insightful)

    by account_deleted ( 4530225 ) on Thursday September 27, 2018 @05:32PM (#57386906)
    Comment removed based on user account deletion
    • We don't really deserve to spread our seed throughout the galaxy.

      Yes, this. If we're going to treat our only home like a tumbledown trailer in a muddy holler, then we deserve to be stuck in it.

    • Re:So (Score:4, Insightful)

      by Spy Handler ( 822350 ) on Thursday September 27, 2018 @07:26PM (#57387576) Homepage Journal

      On the one side, we have someone who could be humanity's best hope for escaping extinction.

      You fogot the part where Musk also absolves your sins and lead you to the kingdom of heaven.

      On the other side, we have a bunch of rich assholes trying gambling that he'll fail, and expecting to pull some money out of thin air if they're right.

      So rich assholes put a gun to his head and made him say "Funding secured"? Even though there was no such funding? It was an outright lie. Unless you're Bill Clinton and you wanna debate what the definition of "is" is.

      Musk brought all of this upon himself, 100 percent. He should've laid off the Ambien and LSD, and gotten some decent nights sleep.

  • Nah, actually, I'm sticking to balogney! Quick, sue me for fraud because you lost money on Peanut Butter futures because you're a fucking dimwit!

  • by cyn1c77 ( 928549 ) on Thursday September 27, 2018 @06:18PM (#57387200)

    Maybe the SEC should sue itself too?

  • by WindBourne ( 631190 ) on Thursday September 27, 2018 @11:53PM (#57388422) Journal
    Musk really needs to get a president into Tesla to handle day-2-day stuff.
    • by AmiMoJo ( 196126 )

      Or just delete his Twitter account.

      The fraud, the accusations of paedophilia, the unfulfilled promises to Tesla owners... They all come from his tweets.

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