Judge orders Tesla’s Musk, SEC to justify fraud settlement

Wil James Murdoch be the new Chairman of Tesla?

FILE PHOTO: Tesla Chief Executive Office Elon Musk speaks at his company's factory in Fremont, California, U.S., June 22, 2012.

The board has not engaged in any "serious" discussions of who should be the chairman, the paper said, citing a source close to the selection process.

Musk took a not-so-subtle shot at the U.S. Securities and Exchange Commission - known to most people as the SEC - in a tweet.

"Musk's false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors", the SEC said in its complaint.

Musk settled with the SEC on Saturday, agreeing to $20 million in fines for himself and another $20 million for Tesla, and agreeing to step down as chairman for at least three years.

Reuters couldn't reach out to Murdoch for comment.

Stephanie Avakian, co-director of the SEC's division of enforcement, during a press conference emphasised that the CEO of a public company has to be careful about making comments publically.

By Randy PennellElon Musk can't say he did anything wrong, but he can let you know how he feels about the Securities and Exchange Commission. However, in what could be seen as a win for shareholders, the agreements essentially require Musk and the company to pay the fines out of their own funds.

More news: Pew: America's Global Image Worsens Again Under Trump

It's not an uncommon practice for a judge to ask for such a letter.

Tesla declined to comment.

Musk, who has long railed against Tesla's short sellers - investors who bet against the company - called the SEC the "Shortseller Enrichment Commission".

The 2nd Circuit has jurisdiction over Nathan's court, and lawyers said Musk's settlement would likely win approval, though orders such as Nathan's are not too common. A judge has yet to approve the settlement. A federal judge sought to rip up a settlement between Citigroup and the SEC in 2011, launching a three-year battle with the SEC.

Thomas Gorman, a partner at Dorsey & Whitney in Washington, D.C., said Musk might argue that the latest tweet might be a mere "personal lament", and not a violation of the settlement. A higher court eventually sided with the SEC. The tweet surprised investors, analysts and Tesla's board of directors. But Dubow said he would be surprised if the judge ultimately rejected the proposed settlement. "It's a high-profile case".

Nathan "may want to know why Tesla is paying a fine because the CEO doesn't know when to shut up", said Adam Pritchard, a University of MI law professor and former SEC lawyer.

Barclays analyst Brian Johnson argued in a recent note that Tesla's stock has a $130 "Musk premium", which could disappear if he is forced to leave the company.

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