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DETROIT: Elon Musk‘s request to scrap a settlement with securities regulators over 2018 tweets claiming he had the funding to take Tesla private was denied by a federal judge in New York.
Judge Lewis Liman on Wednesday also rejected a motion to nullify a subpoena of Musk seeking information about possible violations of his settlement with the U.S. Securities and Exchange Commission.
Musk had asked the court to throw out the settlement, which required that his tweets be approved by a Tesla attorney before being published. The SEC is investigating whether the Tesla CEO violated the settlement with tweets last November asking Twitter followers if he should sell 10% of his Tesla stock.
The whole dispute stems from an October 2018 settlement with the SEC in which Musk and Tesla each agreed to pay $20 million in civil fines over Musk’s tweets about having the “funding secured” to take Tesla private at $420 per share.
The funding was far from locked up, and the electric vehicle company remains public, but Tesla’s stock price jumped. The settlement specified governance changes, including Musk’s ouster as board chairman, as well as pre-approval of his tweets.
Musk attorney Alex Spiro contended the SEC is using the settlement and “near limitless resources” to chill Musk’s speech. It says that Musk signed the settlement when Tesla was a less mature company and SEC action jeopardized the company’s financing.
He also alleged that the subpoena from the SEC is illegal, and that the agency can’t take action about Musk’s tweets without court authorization.
But in a 22-page ruling, Liman wrote that Musk’s claim that economic duress caused him to sign the settlement is “wholly unpersuasive.”
Even if Musk was worried that litigation with the SEC would ruin Tesla financially, “that does not establish a basis for him to get out of the judgment he voluntarily signed,” Liman wrote.
The judge also said the argument that the SEC had used the settlement order to harass Musk and launch investigations was “meritless.”
“Musk could hardly have thought that at the time he entered the decree (settlement) he would have been immune from non-public SEC investigations,” Liman wrote. “It is unsurprising that when Musk tweeted that he was thinking about selling 10% of his interest in Tesla… that the SEC would have some questions.”
Judge Lewis Liman on Wednesday also rejected a motion to nullify a subpoena of Musk seeking information about possible violations of his settlement with the U.S. Securities and Exchange Commission.
Musk had asked the court to throw out the settlement, which required that his tweets be approved by a Tesla attorney before being published. The SEC is investigating whether the Tesla CEO violated the settlement with tweets last November asking Twitter followers if he should sell 10% of his Tesla stock.
The whole dispute stems from an October 2018 settlement with the SEC in which Musk and Tesla each agreed to pay $20 million in civil fines over Musk’s tweets about having the “funding secured” to take Tesla private at $420 per share.
The funding was far from locked up, and the electric vehicle company remains public, but Tesla’s stock price jumped. The settlement specified governance changes, including Musk’s ouster as board chairman, as well as pre-approval of his tweets.
Musk attorney Alex Spiro contended the SEC is using the settlement and “near limitless resources” to chill Musk’s speech. It says that Musk signed the settlement when Tesla was a less mature company and SEC action jeopardized the company’s financing.
He also alleged that the subpoena from the SEC is illegal, and that the agency can’t take action about Musk’s tweets without court authorization.
But in a 22-page ruling, Liman wrote that Musk’s claim that economic duress caused him to sign the settlement is “wholly unpersuasive.”
Even if Musk was worried that litigation with the SEC would ruin Tesla financially, “that does not establish a basis for him to get out of the judgment he voluntarily signed,” Liman wrote.
The judge also said the argument that the SEC had used the settlement order to harass Musk and launch investigations was “meritless.”
“Musk could hardly have thought that at the time he entered the decree (settlement) he would have been immune from non-public SEC investigations,” Liman wrote. “It is unsurprising that when Musk tweeted that he was thinking about selling 10% of his interest in Tesla… that the SEC would have some questions.”
