SEC files complaint against Elon Musk for fraud

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SEC files complaint against Elon Musk for fraud

A few days ago, it was reported that Tesla had missed out on a lucrative investment opportunity by the Saudi Arabian wealth fund. Now, the company's co-founder and CEO, Elon Musk, has found himself in the eye of the Securities and Exchange Commission's (SEC) storm.

The SEC has filed a suit against Musk for a tweet – posted on 7th August 2018 – in which he had talked about privatising the currently public company. Musk had quoted the prices of Tesla's shares at $420 per share, a premium of 20% over the share price on that particular date.

The SEC filed the proceedings in New York's federal court on Thursday on the grounds that Musk's announcement had led to confusion, not only in the stock market but also among investors. The SEC's suit stated, "He (Musk) allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.

Musk’s tweets caused Tesla’s stock price to jump by more than 6% on 7 August and led to significant market disruption." As such, the SEC is also seeking to disallow Musk from holding a position either as a director or an officer of a public company.

An article published in Autocar quotes the co-director of the SEC's enforcement division, Steven Peikin, as saying, "Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders.

An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly." The same article also quoted Musk and the remarks of Tesla's shareholders.

Musk stated, "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."

And the shareholders threw their support behind Musk as they commented, "Tesla and the board of directors are fully confident in Elon, his integrity and his leadership of the company, which has resulted in the most successful US auto company in over a century." Following this development, early on Friday, Tesla's shares had slumped.