SpaceX owner and Tesla CEO Elon Musk attends the E3 gaming convention in Los Angeles, California on June 13, 2019.
Mike Blake | Reuters
Tesla CEO Elon Musk lost an appeal seeking to reverse part of a consent decree signed between Tesla and the Securities and Exchange Commission to settle civil securities fraud charges in 2018. .
The federal appeals court’s decision on Monday upheld an earlier ruling by the US District Court for the Southern District of New York that initially dismissed it.
Musk has been suing the SEC for years over the consent decree, which accuses the SEC of making “false and misleading” statements in a “financing” tweet in August 2018. It was revised in 2019. Tesla’s CEO said he had found a buyer to take the automaker private for $420 a share, a claim later found false by a federal judge.
According to the ruling, the agreement required “prior approval” for Musk’s tweets containing informational material to Tesla, extending to “certain senior executives.”
In a February letter, Musk’s attorney, Alex Spiro, said the 2019 amendment to the consent decree constitutes an “unconstitutional” violation of his right to free speech.
However, the U.S. Court of Appeals for the Second Circuit dismissed those allegations, stating that the court “confirmed that the SEC used the consent decree to conduct a malicious harassment investigation into Mr. Musk’s protected speech.” We found no evidence to support the allegations.”
The court noted that the SEC had conducted “only three investigations” into his tweets since 2018. Among them were his “financing” tweet, a tweet misrepresenting Tesla’s annual production numbers, and a Twitter poll in which Musk suggested selling a 10% stake in Tesla. , according to court filings.
Far from being “malicious,” the court said that “each tweet likely violated the terms of the consent decree.”
Musk’s attorneys also developed a Rule 60(b) argument that allows parties to reopen litigation if the law or circumstances change significantly. Musk’s legal team argued that the SEC’s enforcement methods made compliance “substantially more difficult.”
But the court also dismissed that claim, noting that Musk was only required to consult with Tesla’s general counsel or an in-house securities lawyer.
Mr. Musk’s Twitter activity has drawn the attention of both the SEC and shareholders. Musk was found “not responsible” in a securities fraud trial in February over a “securing funds” tweet. Musk is also trying to fend off lawsuits related to the public promotion of the Dogecoin cryptocurrency.
The court also said Musk could defend himself against SEC charges or negotiate another settlement if he was concerned about SEC oversight of his “right to tweet without even limited internal oversight.” He added that it could have been done. “But he chose Do not,” the court stressed.
The court concluded that, having made that choice, Musk’s team could not argue that it incidentally reopened final judgment simply because Mr. Musk changed his mind.
“We call for further review and will continue to focus attention on the important issue of government speech regulation,” Musk’s attorney Spiro told CNBC in a statement.
Read the verdict below.
