Tesla CEO Musk accuses SEC of calculated effort to ‘chill’ his right to free speech

Elon Musk, CEO of Tesla Inc., waves as he leaves court during the SolarCity trial in Wilmington, Delaware, USA, Tuesday, July 13, 2021.

Al Drago | Bloomberg | Getty Images

Tesla CEO Elon Musk has accused the Securities and Exchange Commission of harassment in a deliberate attempt to “freeze” his right to free search while overseeing his communications with shareholders as part of a 2018 deal that settled securities civil charges against the billionaire.

Musk and Tesla thought the settlement of the charges would end the agency’s “harassment” of Musk and allow the court, not the agency, to enforce it, Musk’s attorney wrote in a new court document on Thursday. “But the SEC broke its promises,” he wrote, adding that the agency “armed the consent decree, using it to try and silence and harass Mr. Musk and Tesla.”

The agency has also yet to distribute to shareholders the $40 million it fined Musk and company in a 2018 settlement, according to a filing that requires a hearing on the matter.

“It appears that the SEC is pursuing Mr. Musk and Tesla in connection with the ongoing investigation largely because Mr. Musk remains an outspoken critic of the government,” Alex Spiro, a lawyer for Musk and Tesla, said in a new document, seeking to get the agency’s attention. The 2018 securities case against him is closed. “The massive effort by the SEC appears to be designed to limit its exercise of First Amendment rights, rather than impartial enforcement of generally applicable laws.”

The letter comes more than a week after Tesla revealed that the SEC sent a new subpoena to Tesla in November 2021.

The financial regulator is trying to determine whether Musk and his Tesla followed through with the revised settlement agreement the agency entered into with them in 2019. According to Tesla’s statement, the SEC is requesting information about “company management processes related to compliance with the SEC settlement agreement.” as amended.”

The subpoena came shortly after the famed CEO polled tens of millions of his Twitter followers asking if he should sell his 10% stake in Tesla. They voted yes. But most of the sales that followed the Twitter poll were part of a plan passed by Musk in September of this year.

In September 2018, the SEC accused Musk of making “false and misleading” statements to investors when he announced via Twitter in August that he had received enough funds for a large private buyout of Tesla at $420 per share. Stocks fluctuated all month, and the deal Musk evaded never went through.

Musk and Tesla had to pay a fine of $20 million each, and Musk was forced to step down as chairman for at least three years as part of the deal. Tesla also had to put in place a system to monitor Musk’s public statements 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 them could be a chairman who replaces Musk, provided that person is not from Tesla and its affiliates. Under the terms of the deal, Musk and Tesla do not acknowledge or deny wrongdoing that regulators are claiming.

Thursday’s filing came hours after Musk tweeted a meme comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler. This was in response to an article that Canadian authorities were investigating cryptocurrency donations in support of a week-long protest against the country’s vaccination mandate.

– CNBC Laura Kolodny contributed to this report.

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