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SEC Reiterates Court Claim That Musk, Tesla Violated Fraud Settlement

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SEC Reiterates Court Claim That Musk, Tesla Violated Fraud Settlement

The U.S. Securities and Exchange Commission isn’t backing down from a battle with its biggest critic — Tesla Inc (NASDAQ: TSLA) CEO Elon Musk. The rivals have engaged in a months-long showdown over Musk’s social media use for company-related news, and on Monday, the conflict escalated.

The Latest

The SEC maintained — as it had in a late-February request to hold Musk in contempt of court — that Musk violated their fall fraud settlement requiring counsel oversight for all tweets material to Tesla shareholders.

"The pre-approval requirement was designed to protect against reckless conduct by Musk going forward," the SEC said in a filing. "It is therefore stunning to learn that, at the time of filing of the [contempt] motion, Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect."

What Happened

Following their legal battle last fall, Tesla established a board committee to monitor Musk’s posts. But the SEC said a Feb. 19 tweet on production projections slipped through the system.

Last week, Musk denied that the post applied to the settlement terms and disputed the “material” nature of its content. He further accused the SEC of violating his First Amendment right.

Now, the agency contends that Musk cannot decide for himself whether tweets are material, and it accuses Musk of having "made no diligent or good faith effort to comply with the pre-approval provision of the court's order."

Why It’s Important

The SEC settlement terms were relatively light. The regulator had previously determined to strip Musk from Tesla’s top seat. Instead, it allowed Musk to remain as CEO but required him to relinquish his chairmanship and pay a $40 million fine.

Now, a critical Musk risks provoking a more vicious response. Whether the SEC will seek a heightened penalty remains to be seen, although some legal experts suggest it could pursue a higher fine or removal from Tesla leadership.

What’s Next

Musk’s lawyers submitted a court request to respond to the SEC’s “unsupported assertions” and present documentation disproving its claims.

After falling about 2.1 percent Monday, Tesla's stock was down another 1.2 percent early Tuesday morning at $266.19 per share.

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Posted-In: Elon MuskNews Legal Top Stories SEC Best of Benzinga

 

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