Tesla CEO Musk accuses SEC of calculated effort to 'chill' his right to free speech
- The SEC's oversight of Musk's communications with shareholders is part of a 2018 agreement that settled civil securities charges against the billionaire.
- Musk and Tesla thought settling the charges would end the agency's "harassment" of Musk and allow the court, not the agency to monitor his compliance, Musk's lawyer wrote in a new court filing Thursday.
- "But the SEC has broken its promises," he wrote.
Tesla CEO Elon Musk accused the Securities and Exchange Commission of harassment in a calculated effort to "chill" his right to free speech in its oversight of his communications with shareholders as part of a 2018 agreement that settled civil securities charges against the billionaire.
Musk and Tesla thought settling the charges would end the agency's "harassment" of Musk and allow the court, not the agency to monitor his compliance, Musk's lawyer wrote in a new court filing Thursday. "But the SEC has broken its promises," he wrote, alleging that the agency has been "weaponizing the consent decree by using it to try to muzzle and harass Mr. Musk and Tesla."
The agency also hasn't yet distributed to shareholders the $40 million it fined Musk and the company as part of the 2018 settlement, according to the filing, which seeks a hearing on the matter.
"The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government," Alex Spiro, a lawyer for Musk and Tesla, said in the new filing, seeking to bring the agency's 2018 securities case against him to a close. "The SEC's outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion."
The letter comes more than a week after Tesla disclosed that the SEC issued a new subpoena to the automaker in November 2021.
The financial regulator is trying to determine whether Musk and Tesla complied with a revised settlement agreement that the SEC struck with them in 2019. According to Tesla's filing, the agency is seeking information on the company's "governance processes around compliance with the SEC settlement, as amended."
The subpoena came shortly after the celebrity CEO polled his tens of millions of Twitter followers in asking if he should sell 10% of his stake in Tesla. They voted yes. But a major portion of the sales that followed the Twitter poll were part of a plan that Musk adopted in September 2021.
The SEC charged Musk in September 2018 with making "false and misleading" statements to investors when he announced that August via Twitter that he had secured enough funding for a massive private buyout of Tesla at $420 a share. The stock seesawed all month and the deal Musk alluded to never materialized.
Musk and Tesla had to each pay $20 million in fines and Musk was forced to step down as chairman for at least three years as part of the revised settlement agreement. Tesla also had to put in place a system for monitoring Musk's statements to the public about the company, whether on Twitter, blog posts or any other medium.
Tesla also had to appoint two independent directors to its board. Under the terms of the agreement, Musk and Tesla neither admitted nor denied wrongdoing alleged by regulators, but they also could not claim innocence.
The Thursday filing came hours after Musk tweeted a meme comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler. It was in response to an article about Canadian authorities investigating cryptocurrency donations supporting a weekslong protest against the country's vaccine mandate.
Musk's tweet caused a public backlash. The Auschwitz Museum wrote in a reply to him on Twitter: "Using the image of Adolf Hitler & therefore exploiting the tragedy of all people who suffered, were humiliated, tortured & murdered by the totalitarian regime of Nazi Germany created by him is sad & disturbing. It disrespects the memory of all victims & hurts many people."
Musk eventually deleted the tweet.
The SEC declined to comment on Thursday. However, Judge Alison J. Nathan who presided over the case (United States Securities and Exchange Commission v. Musk) on Thursday ordered the SEC to respond to Musk's allegations by Feb. 24.
— CNBC's Lora Kolodny contributed to this report.
Clarification: This story has been updated to clarify that the major portion of the sales that followed the Twitter poll were part of a plan that Musk adopted in September 2021.