Tesla CEO Elon Musk accused the Securities and Exchange Commission of harassment in a calculated effort to “chill” his right to free speech in its oversight of his communications with shareholders as part of a 2018 agreement that settled civil securities charges against the billionaire.
Musk and Tesla thought settling the charges would end the agency’s “harassment” of Musk and allow the court, not the agency to monitor his compliance, Musk’s lawyer’s wrote in the filing. “But the SEC has broken its promises,” they wrote, adding that the agency has been “weaponizing the consent decree by using it to try to muzzle and harass Mr. Musk and Tesla.”
The agency also hasn’t yet distributed to shareholders the $40 million it fined Musk and the company, according to the filing which seeks a hearing on the matter.
“The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” Alex Spiro, a lawyer for Musk and Tesla, said in a new court filing Thursday, seeking to bring the agency’s 2018 securities case against him to a close. “The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion.”
The letter comes more than a week after Tesla disclosed that the SEC issued a new subpoena to Tesla in November 2021.
The financial regulator is trying to determine whether Musk and his Tesla complied with a revised settlement agreement that the agency struck with them in 2019. According to Tesla’s filing, the SEC is seeking information on the company’s “governance processes around compliance with the SEC settlement, as amended.”
The subpoena came shortly after the celebrity CEO polled his tens of millions of Twitter followers in the asking if he should sell 10% of his stake in Tesla. They voted yes. But a major portion of the sales that followed the Twitter poll were part of a plan that Musk adopted in September this year.
The SEC charged Musk in September 2018 with making “false and misleading” statements to investors when he announced that August via Twitter that he had secured enough funding for a massive private buyout of Tesla at $420 a share. The shares seesawed all month and the deal Musk eluded to never materialized.
Musk had to pay a $20 million fine and step down as chairman for a period of at least three years as part of the deal. Tesla also had to put in place a system for monitoring Musk’s statements to the public about the company, whether on Twitter, blog posts or any other medium.
Tesla also had to pay a separate $20 million fine, and appoint two independent directors to the board. One of those can be the chairman that replaces Musk, provided that person comes from outside Tesla and its affiliates. Under the deal’s terms, Musk and Tesla neither admit or deny wrongdoing alleged by regulators.