SEC Rejects Elon Musk’s Efforts to Escape ‘Funding Secured’ Tweet Settlement

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Kevin George
Kevin George
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Kevin George is a freelance crypto writer and editor for Investopedia. He holds a master's degree in finance and has extensive knowledge and experience in the area of trading, markets, and economics.
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Published February 24, 2023
Tesla head Elon Musk talks to the press as he arrives to to have a look at the construction site of the new Tesla Gigafactory near Berlin.

Getty Images / Maja Hitij

Elon Musk made an attempt to wriggle out of a settlement he made with the Securities and Exchange Commission (SEC)—but the regulator is having none of it.

A letter sent from the SEC to the U.S. Court of Appeals for the Second Circuit in New York this week insisted that a 2018 settlement agreement between the regulator and the Tesla (TSLA) co-founder is constitutional and valid.

Key Takeaways

  • Tesla and its former CEO Musk are still in hot water over the latter’s 2018 tweets about taking the company private.
  • The SEC has rebuffed a separate ruling in San Francisco and wants to uphold a 2018 settlement between the parties.
  • Despite the legal wranglings, Tesla’s productivity and balance sheet continue to impress
  • Attention will now turn to Tesla's Investor Day next week to see if it can spur a rebound in the automakers’ stock.

SEC Wants to Enforce Previous Settlement

The case, SEC v. Musk, No. 22-1291, relates to a 2018 tweet by Musk, who claimed that he had the “funding secured” to take Tesla private.

In response to his tweet, the SEC charged Musk with civil securities fraud after an investigation, and the billionaire reached a settlement with regulators in 2018.

The settlement required that Tesla and Musk each pay $20 million fines and Musk was ordered to relinquish his role as chairman of the board at Tesla for three years. Musk also agreed to have a so-called “Twitter sitter"— a securities lawyer who is on hand to review all of Musk’s tweets relating to Tesla before they go live.

In a letter to the New York appeals court this week, Musk’s attorney Alex Spiro pointed to a verdict in a separate shareholder class action trial in San Francisco on Feb. 2, where Spiro and Musk convinced jurors that the Tesla CEO did not violate securities laws with his 2018 tweets.

However, the SEC argued in this week’s letter that “Musk waived his opportunity to test the Commission’s allegations at trial when he voluntarily agreed (twice) to a consent judgment.”

Legal Woes Will Take a Back Seat to Investor Day

Tesla’s legal issues will soon take a back seat to the automaker’s 2023 Investor Day, which will be live-streamed from the company’s Texas Gigafactory.

Inside EVs has reported this could be a “historic moment” if speculation that Tesla’s Model 3 and Model Y will be redesigned is proven true.

Tesla’s recent fourth-quarter earnings sparked a rally of around 60% in the company’s share price after it announced another record-breaking quarter and year. Tesla reported its highest-ever quarterly revenue, operating income, and net income.

For the full year 2022, total revenue grew 51% year-over-year to $81.5B with net income (GAAP) more than doubling to $12.6B.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Twitter. "Elon Musk."

  2. Securities and Exchange Commission. "Elon Musk Charged With Securities Fraud for Misleading Tweets."

  3. Securities and Exchange Commission. "Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge."

  4. Court Listener. "Letter From Alex Spiro Feb. 21, 2023."

  5. Court Listener. "Letter From US Securities Exchange Commission Feb. 22, 2023."

  6. Inside EVs. "Tesla Upgrades Leaked, Redesigns and Huge Announcement".

  7. Tesla. "Q4 and Full Year 2022 Earnings".

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