Click to Skip Ad
Closing in...

Former SEC lawyer: Elon Musk ‘funding secured’ tweet didn’t deserve a lawsuit

September 28th, 2018 at 5:21 PM
Elon Musk SEC lawsuit

There’s a difference between fraud and just being irresponsible. That’s how former U.S. Securities and Exchange Commission lawyer Thomas Gorman defends his opinion that his former employer probably went too far in suing Tesla CEO Elon Musk over the controversial entrepreneur’s now infamous nine-word tweet back in August. The one in which he proposed taking Tesla private and casually mentioned that funding had been secured.

The agency is contending that Elon made “false and misleading” statements around that tweet, breaking securities law and harming investors. Not so fast, though, says the former SEC lawyer: “There’s a reasonable basis for what he said,” Gorman told Business Insider about Musk’s tweet. 

Continues BI: “The SEC’s lawsuit claims Musk said a representative from Saudi Arabia’s Public Investment Fund had shown interest in taking Tesla private, but that Musk had never discussed any of the specific terms he described on Twitter with the Saudi fund or any other potential backers before making them public. Those terms included the proposed $420 share price and an option for all existing Tesla shareholders to remain with the company after it went private.”

According to Gorman, the reported interest from the Saudi fund was enough to provide a legal and reasonable basis for Musk’s tweet, even if it was “ill-advised” and even if Musk hadn’t yet figured out all the details, as the SEC alleges as part of the basis for its suit.

“There’s a significant difference between bringing a law enforcement action, charging someone with fraud, and saying, ‘This is not really a great way to do your business,'” Gorman told BI.

Regardless, the stakes are enormous now that the lawsuit has been filed.

Tesla shares immediately got pummeled. As an indication of how serious this is, the SEC is asking a judge to issue a lifetime ban preventing Elon from ever serving as an officer or director of a public company again. That, according to Columbia Law School professor John Coffee in a CNN interview, “is a nuclear threat to force him to settle.

The SEC charged Musk under a section of the federal Exchange Act that’s used in litigation against insider traders and market manipulators, according to that CNN report.
In a statement he released, Elon said: “This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Andy is a reporter in Memphis who also contributes to outlets like Fast Company and The Guardian. When he’s not writing about technology, he can be found hunched protectively over his burgeoning collection of vinyl, as well as nursing his Whovianism and bingeing on a variety of TV shows you probably don’t like.

Popular News