Elon Musk Is Being Sued For Tweets That Violate His SEC Deal
Elon Musk Is Being Sued For Tweets That Violate His SEC Deal. A Tesla investor is suing the company board and Musk for continuing to send “erratic tweets” that violate a settlement with the U.S. Securities and Exchange Commission that requires oversight of his social media activities. The lawsuit, which was first reported by Bloomberg, claims Musk is exposing the company to potential fines and penalties from regulators and could drive down its share price. The lawsuit names the board for failing to control Musk’s behaviour, which puts the company at risk. The lawsuit by investor Chase Gharrity, which was filed in Delaware Chancery Court, was unsealed on Frida; it was originally filed March 8.
According to Tech Crunch, Tesla, Musk and the SEC reached an agreement in April 2019 that gave the CEO freedom to use Twitter — within certain limitations — without fear of being held in contempt for violating an earlier court order. The agreement allows Musk to tweet as he wishes except when it’s about certain events or financial milestones. In those cases, Musk must seek pre-approval from a securities lawyer, according to the agreement filed with Manhattan federal court.
This latest lawsuit alleges that Musk’s tweeting violates the April 2019 judgment and betrays his, and the board’s, fiduciary duty. The 105-page suit cites several tweets sent from Musk’s account, including a tweet on May 1, 2020 — over a year after the SEC judgment — which stated: “Tesla stock is too high IMO.”
Tech Crunch also stated that, the lawsuit revealed on Friday alleges that the Tesla board has also failed to secure a general counsel “who can provide advice untainted by Musk.” Three general counsels departed from the company in 2019, which the lawsuit points to as evidence that none were able to exercise independent advice that differed from Musk’s “desired outcome.”
The tweet sent shares into a free fall — nearly 12% in the half-hour following his stock price tweets. The tweet was one of many sent out in rapid fire that day, covering a variety of topics and demands “give people back their freedom” and lines from the U.S. National Anthem to quotes from poet Dylan Thomas and a claim that he will sell all of his possessions. Musk later told the Wall Street Journal in an email that he was not joking and that his tweets were not vetted in advance.
