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The Securities and Exchange Commission has filed a plan to distribute more than $40 million to Tesla shareholders in what one source said was a win for Elon Musk, who had pressed the issue in federal court.
The payout is part of the long-running saga of Musk and his tweets — specifically one in 2018 that said he’d arranged financing to sell Tesla for $420 a share. The SEC rapped him on the knuckles for what it said was fraud; Musk and the regulator settled — leading to a $20 million fine for Tesla and a $20 million fine for Musk personally that would be distributed to shareholders.
Musk on Tuesday for the first time asked a federal judge to be let out of the SEC settlement — a so-called “consent order” that calls for a Tesla lawyer to vet his tweets before sending. As part of the lawsuit, filed in federal court, Musk claimed in February that the SEC hadn’t held up its end of the bargain and had stiffed affected shareholders out of their $40 million.
New York Southern District Judge Alison Nathan on Tuesday ordered the SEC to answer Musk’s request to terminate the consent decree by March 22, court filings said. Later in the day, the SEC filed a distribution plan to pay Tesla shareholders.
Judge Nathan also ruled that a Nov. 29 subpoena the SEC served on Tesla to probe compliance with the September 2018 settlement between the company and the regulatory agency exceeded the investigatory power of the SEC and was issued in bad faith since it did not go through the court, court filings said.
The SEC wants to prove that Musk has been sending tweets without the approval of Tesla lawyers and therefore has broken the consent decree, sources familiar with the matter said.
Judge Nathan soon will rule on whether both sides are playing by the rules — or if the SEC has the right to investigate Musk’s behavior and perhaps impose greater penalties.
In a sworn declaration, Musk claimed he was “forced” to sign the SEC truce that settled the flap over his now-infamous Aug. 7, 2018, tweet in which he claimed he had “funding secured” to take Tesla private at $420 a share.
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