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SEC Charges Elon Musk With Fraud Over ‘Funding Secured’ Tweets

The U.S. Securities and Exchange Commission (SEC) charged on Thursday Elon Musk with securities fraud for a series of false and misleading tweets about taking Tesla private at $420 per share and for claiming “funding secured” for a potential deal. The SEC press release also calls for “a bar prohibiting Musk from serving as an officer or director of a public company.”

Musk has recently drawn a lot of attention after saying on August 7 that he would take Tesla private, only to backtrack on that proposal two weeks later. Tesla will stay public, Musk said on August 24, ending more than two weeks of speculation and calculation about how much a go-private deal would cost and who could be involved in it.

“Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote. In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC said in the complaint filed in federal district court in the Southern District of New York.

After the complaint was filed, Steven Peikin, co-director of the SEC’s Division of Enforcement, said at a press conference on Thursday:

“We allege that Musk had arrived at the price of $420 by assuming a 20 percent premium over Tesla’s then-existing share price, and then rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it.”

Related: What Explains The Bizarre Price Surge In Oman Crude?

The complaint “alleges that Musk violated antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company,” the SEC said in a statement.

The SEC’s complaint was filed after Musk and his legal team decided in the last minute that they would fight the charges rather than settle them with the SEC, which had already drafted a settlement agreement, The Wall Street Journal reported, quoting people familiar with the issue.

In a statement commenting on the SEC charge, Musk said that “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.”

By Tsvetana Paraskova for Oilprice.com

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