Elon Musk and Tesla face lawsuit for allegedly violating SEC deal

Jon Fingas
·Associate Editor
·1 min read

Elon Musk is once again facing legal trouble for his tweets. Both Bloomberg and TechCrunch report that investor Chase Gharrity has sued Musk and Tesla for allegedly violating the terms of an SEC deal governing the CEO's tweets. Musk continues to send unapproved, "erratic" tweets that open the company billions of dollars in potential losses and penalties, Gharrity said. The investor also claimed that Tesla hadn't obtained general counsel that could offer advice "untainted by Musk."

The most notable example was a May 1, 2020 tweet in which Musk claimed that Tesla's share price was "too high imo." That post sent Tesla's stock plummeting 12 percent in just 30 minutes, and Musk would go on to say it was neither a joke nor screened in advance.

Musk's first tweet-related SEC confrontation came in August 2018, when he talked about Tesla going private. He reached a settlement with the SEC later that year, only to grapple with the regulator again in 2019 over EV production claims. An amended deal from April 2019 requires that Musk get pre-approval from a securities lawyer before he tweets anything relating to key events and financial data.

Tesla hasn't commented on the lawsuit and is believed to have disbanded its PR team.

There are no guarantees the lawsuit will move forward. If it does, though, it could have significant ramifications for Musk and Tesla. While the court can't impose regulatory consequences like the SEC, it could impose penalties and otherwise put pressure on Tesla to rein in Musk's Twitter habits.