DETROIT (AFP) – A New York federal judge has rejected Elon Musk’s request to overturn a settlement with securities regulators over 2018 tweets that claimed he had the funding to take Tesla private.
On Wednesday, Judge Lewis Lehman also dismissed a request to strike a subpoena from Musk seeking information about possible violations of his settlement with the US Securities and Exchange Commission.
Musk had asked the court to dismiss the settlement, which required approval from Tesla’s attorney for his tweets before they were posted. The Securities and Exchange Commission is investigating whether the Tesla CEO violated the settlement with tweets last November asking Twitter followers if he should sell 10% of his Tesla stock.
The whole dispute stems from the October 2018 settlement with the Securities and Exchange Commission in which Musk and Tesla each agreed to pay $20 million in civil penalties over Musk’s tweets about obtaining “secured financing” for a Tesla acquisition at $420 per share.
Funding was far from closing, and the electric car company remained public, but Tesla’s stock price jumped. The settlement outlined changes to governance, including the removal of Musk as chairman of the board, as well as pre-approval of his tweets.
Musk’s attorney, Alex Spiro, asserted that the Securities and Exchange Commission is using the settlement and “unlimited resources” to smooth over Musk’s rhetoric. It says that Musk signed the settlement when Tesla was a less mature company and the Saudi Electricity Company’s action threatened the company’s financing.
He also claimed that the SEC’s subpoena is illegal, and that the agency could not take action on Musk’s tweets without court permission.
But in a 22-page judgment, Lehman wrote that Musk’s claim that economic coercion made him sign the settlement was “completely unconvincing.”
Even if Musk was concerned that litigating with the Securities and Exchange Commission would damage Tesla financially, Lehman wrote, “this does not establish him to exit the judgment that he voluntarily signed.”
The judge also said that the argument that the Securities and Exchange Commission had used the settlement order to harass Musk and initiate investigations was “unfounded.”
“It was hard for Musk to believe that by the time he entered the ordinance (the settlement) he would have been immune to non-public SEC investigations,” Lyman wrote. “It’s no surprise that when Musk tweeted that he was considering selling 10% of his interest in Tesla… the Securities and Exchange Commission had a few questions.”
A message was left on Wednesday asking for comment from Spiro on whether Musk would appeal the Lyman order.
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