The Securities and Exchange Commission (SEC) alleges that when Tesla CEO Elon Musk tweeted he had secured funding to take the company private, he committed fraud.

The SEC states this tweet was a lie because Musk had not actually secured funding. The commission also alleges he did not properly notify regulators of these events.

Musk met with a wealth fund, but made no commitments

The funding Musk had allegedly secured was with the Saudi Arabian sovereign wealth fund. During multiple meetings in January, the fund expressed interest in investing in Tesla. Then after months without contact, he met with the investors in July and learned the fund had acquired 5 percent of Tesla’s stock. During this meeting, a fund representative expressed an interest in taking the Tesla private, but neither party made a commitment, discussed terms or put anything in writing.

Board authorized Musk to talk to shareholders

After this meeting, Musk did email Tesla’s board about the possibility of taking the company private. He also stated there was a lot of uncertainty about the deal. A few days later, he spoke to the board on the phone, and the members authorized him to contact shareholders to see if they would be interested in the deal. However, Musk did not contact any shareholders or provide the board with a specific proposal.

Just four days after the phone call, he tweeted about a pending deal to take the company private.

Securities fraud involves misrepresentation

Securities fraud deals with fraud that relates to stocks or bonds. It occurs when a corporation or individual misrepresents or tries to manipulate the public by providing untrue information about these securities.

The SEC alleges Musk’s tweet mispresented to the public the certainty of Tesla going public, so he is guilty of securities fraud. The SEC is seeking fines, as well as to bar Musk from serving as an officer for a public company again.

Musk denies any wrongdoing and claims the charges are unjustified.

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