By
Tolu Ajiboye
April 24th, 2024
In addition, the SEC raised a fresh allegation against Musk for tweeting that Tesla would produce around 500,000 cars this year.
Tesla (NASDAQ: TSLA) and Twitter CEO Elon Musk failed in his latest attempt to appeal a 2018 settlement with the US Securities and Exchange Commission (SEC). This settlement requires scrutinization of every Tesla-related tweet made by the Tesla boss. Musk was alleged to have tweeted some misleading facts about the company. Since then, the SEC has stated that a legal representative of his automobile company must approve his Tesla-related tweets before they go live.
During the appeal at the 2nd US Circuit Court of Appeals in Manhattan, Musk’s legal representative argued that the consent decree in 2018 was a “prior restraint” on his speech. Notably, the business mogul purchased Twitter for a mouthwatering amount in 2022. Musk is currently Tesla’s biggest shareholder, with a 13.4% stake.
Elon Musk and His Second Appeal: Judges Suggest Other Methods
Addressing the second appeal, a three-judge court panel explained that the request from Elon Musk is a wrong approach to the pending decree. The board explained that he could use other methods to earn the freedom to post Tesla-related topics without internal oversight. Musk could have exercised his right to litigate and defend against the (SEC) charges or even negotiate a different agreement.
Before the lawsuit birthing the agreement that a Twitter lawyer must supervise Musk’s Tesla-related tweets, the billionaire posted a “funding-secured” tweet. The infamous tweet got the SEC’s attention, and the Commission filed a complaint against the August 7, 2018 tweet. In the filings, the SEC alleged that Musk lied about securing funds for a private takeover of Tesla at $420 per share.
After much deliberations on the second appeal, Musk agreed to vacate his position as the chairman of Tesla Inc. and pay a fine of $20 million. The automaker also agreed to pay a separate penalty fee of $20 million. The SEC noted that the charge and fine against Tesla is caused by the company’s failure to disclose controls and procedures relating to Musk’s tweets.
2018 Consent Decree Remains Valid
In addition, the SEC raised a fresh allegation against Musk for tweeting that Tesla would produce around 500,000 cars this year. However, he corrected himself by clarifying that he meant this company would produce at an annualized rate of 500,00 vehicles by year-end. The regulatory body intended to apprehend him for violating the 2018 agreement. However, one of the judges presiding over this case suggested that the three parties involved should agree on a new resolution.
Earlier this year, Elon Musk filed an appeal saying the SEC had abused the 2018 consent decree by “launching endless, boundless investigations” on his speech. He claimed the agreement intrudes on his First Amendment right to free speech. This attempt failed after Judge Lewis Liman denied the appeal and referred it to the 2nd US Circuit Court of Appeals in Manhattan.