Judge orders Tesla and SEC to justify settlement of fraud lawsuit

Agreement calls for Tesla and its founder, Elon Musk, to pay US$20 million each and for Musk to step down as chairman

PUBLISHED : Friday, 05 October, 2018, 4:53am
UPDATED : Friday, 05 October, 2018, 9:18pm

A federal district judge told both Tesla CEO Elon Musk and the US Securities and Exchange Commission on Thursday to provide a joint statement explaining why their fraud settlement should be approved.

Judge Alison Nathan said that it was a regular practice at the Southern District of New York in Manhattan to request a joint statement. The judge said to submit the statement by October 11. Shares of the company closed down 4.4 per cent, at US$281.83, in trading on Thursday.

Musk removed as Tesla chairman, but will remain CEO in US$40 million settlement

Tesla and Musk have agreed to pay US$20 million each to the regulatory agency under a settlement for a securities fraud lawsuit related to Musk’s early August tweet about taking the electric car maker private, in which he said he had financing “secured”.

As part of the settlement, Musk will also step down as the company’s chairman but remain chief executive. The SEC charged Musk with misleading investors with the tweet, saying it had no basis in fact.

“The court has a duty to ensure the proposed consent judgement is ‘fair and reasonable’,” Judge Nathan wrote in the order.

The SEC and Tesla did not immediately respond to request for comment.

Late in the afternoon, Musk seemed to mock the SEC in another tweet, calling it the “Shortseller Enrichment Commission”. Shares fell another 2 per cent in after-hours trading.

Separately, the company announced that it would publicly release accident figures for its vehicles on a quarterly basis.