US SEC ready to distribute funds from Tesla settlement
The top U.S. securities regulator asked a judge for permission to distribute $40 million to investors it obtained in a 2018 civil settlement with Elon Musk and Tesla Inc that resolved a fraud charge and required Musk to obtain advance approval for some tweets.
Musk’s lawyers had accused the U.S. Securities and Exchange Commission last month of having “broken its promises” by dragging its feet on the payout, while trying to muzzle their client’s speech and harass him with an “endless” investigation into his conduct.
The SEC did not mention the dispute in a Tuesday night court filing describing what it called a “fair and reasonable” means to distribute the payout, which has grown to $41.2 million with interest, that deserves “significant deference.”
Alex Spiro, a lawyer for Musk, declined to comment on Wednesday.
An SEC investigation into Tesla stock sales by Elon Musk and his brother Kimbal is partly focused on trades Kimbal made ahead of Elon’s decision to sell based on a Twitter poll #WSJWhatsNow https://t.co/gyqiaLppsj pic.twitter.com/QL6FrHuhXG
— The Wall Street Journal (@WSJ) February 26, 2022
Musk and Tesla each paid $20 million civil fines, and Musk stepped down as Tesla’s chairman, to resolve SEC claims that Musk defrauded investors on Aug. 7, 2018, by tweeting that he had “funding secured” to take his electric car company private.
A related consent decree also required Musk to obtain pre-clearance from Tesla lawyers for tweets and other public statements that could be material to Tesla.
Musk believes the SEC has since “weaponized” the decree to stifle his speech as punishment for his criticism of the government.
On Tuesday, he formally requested to end the decree, adding that he felt pressured to accept it.
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“I never lied to shareholders,” Musk said in a court filing. “I entered into the consent decree for the survival of Tesla, for the sake of its shareholders.”
U.S. District Judge Alison Nathan in Manhattan enforces the decree and would need to approve the distribution plan.
Payouts would go to investors who lost money in Tesla stock in the 1-1/2 days after Musk’s tweet.
The SEC filed the proposed plan 10 hours after Musk asked to scrap the consent decree.
The cases are SEC v Musk, U.S. District Court, Southern District of New York, No. 18-08865; and SEC v Tesla Inc in the same court, No. 18-08947.
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