Published: Sun, September 30, 2018
Markets | By Noel Gibbs

SEC Suing Elon Musk for Fraud

SEC Suing Elon Musk for Fraud

Tesla CEO Elon Musk said he is "deeply saddened and disappointed" by the US Securities and Exchange Commission's lawsuit against him in a company statement to Business Insider.

The SEC goes on to hilariously allege that Musk, who recently took a drag of a spliff during a Joe Rogan podcast, calculated the $420 price because he thought the weed reference would amuse his girlfriend Grimes.

That brief tweet was enough to send the stock soaring - up by almost 11 percent by the end of the day.

Musk has denounced the lawsuit as "unjustified action", dismissing the allegations and saying that he has "always taken action in the best interests of the truth, transparence and investors".

The company's fortunes on Wall Street worsened considerably as of Thursday, sinking about 10 percent in after-hours trading to $$277.50, down 25 percent since the day of the tweet.

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The lawsuit also seeks to bar him from running public companies, which would include Tesla, as well as a civil fine.

The lawsuit was filed in the US District Court in Manhattan.

In the texts with Grimes, which Banks posted on her Instagram story in August, Musk's girlfriend appears to state: "he got into weed cuz of me and he's super entertained by 420 so when he chose to take the stock private he calculated it was worth 419$ so he rounded up to 420 for a laugh and now the sec is investigating him for fraud". Musk said that he rounded the number up to $420 after learning the significance of the number in marijuana culture.

The suit claims that when Musk tweeted he had "funding secured" to take Tesla private, he had not discussed any specific terms with potential sources of funding. The statement said their focus remains ramping up production of the company's Model 3 sedan - which has seen serious production issues and delays - and "delivering for our customers, shareholders and employees".

Over the next few hours, Musk followed up by posting three more tweets containing what the SEC calls "additional materially false and misleading statements".

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"A chairman and CEO of a public company has important responsibilities to shareholders", Stephanie Avakian, co-director of the SEC's division of enforcement, said during a press conference Thursday, according to CNBC.

The SEC case, filed in NY this afternoon, alleges the Tesla billionaire made "false and misleading statements" in his now infamous 7 August tweet.

Pending final judgement from the court, Musk will remain as chief executive at Tesla unless he or its board decide otherwise.

Tesla's stock price and trading volume skyrocketed in the wake of Musk's tweets.

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