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Friday, September 30, 2022

SEC Pushes Back After Tesla and Musk Accuse Regulator of Harassment

Image for article titled SEC Pushes Back After Tesla and Musk Accuse Regulator of Harassment

Photo: Win McNamee (Getty Images)

The U.S. Securities and Exchange Commission, after being accused by Tesla CEO Elon Musk this week of conducting a “harassment campaign” against him, has responded with a reminder to Musk that this level of federal scrutiny was part of the deal he agreed to after his shitposting landed him in hot water.

In 2018, the SEC charged Musk with issuing “false and misleading” statements to investors after he tweeted that he had secured funding to take Tesla private at $420 a share. The deal never materialized, and following an investigation, the SEC alleged that Musk’s tweet constituted fraud. Tesla, Musk, and the SEC eventually agreed to settle the case, and as part of the conditions, Musk was forced to temporarily step down as chairman of Tesla’s board. Additionally, Tesla and Musk paid a total of $40 million in fines and agreed to screen some of Musk’s social media posts through a securities law expert before publishing them online.

On Thursday, Tesla and Musk sent a letter to U.S. District Judge Alison Nathan, the federal judge overseeing the proceedings, accusing the SEC of using its resources to conduct “endless, unfounded investigations” into the company and its CEO.

“The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” wrote Musk’s attorney Alex Spiro. Additional allegations included that the regulator had been trying to “muzzle and harass” Musk, and its frequent check-ins seemed “calculated to chill” the billionaire’s exercise of his First Amendment rights.

The letter went on to claim the SEC had “broken promises” by dragging its feet to distribute the $40 million settlement to Tesla shareholders, another condition of the deal.

The SEC’s Stephen Buchholz responded in a letter to the courts Friday that the ongoing investigative activity Tesla and Musk were characterizing as harassment was actually consistent with the expectations outlined by the court overseeing the settlement. And it’s not as if Musk hasn’t given the regulator ample reason to continue its scrutiny: In the years since the settlement, the SEC has written to Tesla repeatedly asking why certain tweets containing material business information weren’t screened by the company’s lawyers as per their agreement. Musk, being the troll he is, also seems all too happy to keep poking the hornet’s nest, antagonizing the SEC with tweets like this one from July 2020: “SEC, three letter acronym, middle word is Elon’s.”

As for getting the money to shareholders, the SEC said that process remains underway but should wrap up within the next month. It also noted neither Tesla nor Musk had ever expressed concerns about this matter to the agency before.

“Given the complexity of the distribution, it has taken time to develop the plan of allocation,” Buchholz wrote. “That process is nearing completion and, barring any unforeseen circumstances, the Distributions staff expects to submit the proposed plan of distribution for the Court’s approval by the end of March 2022.”

Now that the SEC has responded to Tesla’s allegations, it’s unclear what the next steps for the proceedings might be. Judge Nathan has previously asked the two sides to work through their dispute rather than throw the matter back to the courts, the Wall Street Journal reports. But given Musk’s penchant for theatrics and sparking legal battles, that solution seems unlikely.

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