Judge asks Tesla, SEC to justify settlement of fraud lawsuit

Irene MckinneyOct 05, 2018

As earlier mentioned in People Matters, the Securities and Exchange Commission (SEC) had charged Musk with misleading investors with tweets on 7th August that said he was considering taking Tesla private at $420 a share and had secured funding.

"Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work", Musk, a frequent critic of investors betting against the electric auto company, wrote on Twitter. "And the name change is so on point!"

Musk's comments on the SEC come less than a week after Musk reached a settlement with the SEC, which sued him over his declaration that he had "funding secured" to take Tesla private.

The SEC declined to comment. However, at the last minute, Musk's lawyer reportedly called the SEC and told them that his client was no longer interested in settling. "But you don't take gratuitous shots at the SEC".

Musk has frequently sparred with short sellers who have bet against the company, and his tweet suggests he believes the SEC acted to benefit his enemies.

The tweet came just hours after U.S. District Court Judge Alison Nathan in Manhattan ordered Musk and the SEC to submit a joint letter justifying the terms of the settlement by October 11.

Nathan said it was her regular practice to request such letters.

The settlement also required Tesla's board to implement procedures for reviewing Musk's communications with investors, which include tweets.

In June, Musk wrote that shorts "have about three weeks before their short position explodes"-presumably a prediction that Tesla's strong quarterly results would cause Tesla's stock to rise".

On Thursday, the federal judge responsible for green-lighting the settlement asked the SEC and Musk to provide a joint statement explaining why the deal should be approved.

The case is SEC v Musk, U.S. District Court, Southern District of New York, No. 18-08865.

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