Tesla stockholders ask judge to silence Musk in fraud case
Tesla stockholders accuse Elon Musk of false and unlawful statements.
A group of Tesla shareholders is seeking a federal judge to force Tesla CEO Elon Musk to stop commenting on the lawsuit after he made some tweets in 2018 regarding taking the firm private.
In court documents, lawyers for Tesla stockholders also stated that the judge in the case has ruled that Musk's tweets about having "funding secured" to take the company private were false, and that his comments also violated a 2018 court settlement with US securities regulators in which Musk and Tesla each agreed to pay $20 million in fines.
Musk said he had the cash to take Tesla private in 2018 during an interview at the TED 2022 conference on Thursday. He swore at the Securities and Exchange Commission and claimed he only settled because bankers threatened to cease giving funding if he didn't, causing Tesla to go bankrupt if he didn't.
The interview and legal action occurred just days after Musk, the world's richest man, made a contentious offer to buy Twitter for $43 billion, or $54.20 per share, and turn it into a private corporation. On Friday, Twitter's board of directors approved a "poison pill" plan that would make Musk's purchase of the company's stock prohibitively expensive.
Tesla shareholders' lawyers claimed in court filings filed Friday that Musk is attempting to sway possible jurors in the lawsuit. They claim that Musk's tweets in 2018 about having enough money to take Tesla private for $420 per share were written to manipulate the stock price, resulting in a loss to shareholders.
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As the case nears trial, lawyers believe Musk is waging a campaign to sway potential jurors.
“Musk’s comments risk confusing potential jurors with the false narrative that he did not knowingly make misrepresentations with his Aug. 7, 2018 tweets,” the lawyers wrote. “His present statements on that issue, an unsubtle attempt to absolve himself in the court of public opinion, will only have a prejudicial influence on a jury.”
The lawyers requested San Francisco Judge Edward M. Chen to prevent Musk from making any further public statements about the case until after the trial. Musk's lawyers have until Wednesday to answer, according to Chen.
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Musk's lawyer, Alex Spiro, indicated in an email on Sunday that the plaintiffs' lawyers are demanding a large settlement. "Nothing can ever erase the fact," he said, "which is that Elon Musk was considering and could have taken Tesla private."
“All that’s left some half-decade later is random plaintiffs lawyers trying to make a buck and others trying to block that truth from coming to light, all to the detriment of free speech.”
However, the lawyers for the shareholders claimed that Chen had already concluded that Musk's tweets were inaccurate and misleading, and that "no reasonable juror could find differently."
SEC files a complaint
As of Sunday, Judge Chen's order, which was issued on April 1, was not in the public court file. It was sealed, according to Adam Apton, a lawyer for the shareholders, because it contains evidence that Musk and Tesla's claim is confidential. He noted in an email that it will remain sealed until the parties agree on what should be kept sealed. “Our motion for TRO (temporary restraining order) accurately describes the issues decided by the court,” Apton wrote.
The SEC launched a complaint against Musk after his 2018 tweets, citing securities law violations. Musk then signed the court agreement and agreed to pay the fine. Part of the agreement says that Musk “will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis.”
If Musk breaks the deal, the SEC has the right to petition the court to throw it out and reinstate the securities fraud charge, according to the agreement. On Sunday, a message was left with the SEC, requesting comment.
Spiro has already sought a Manhattan federal court to throw down the deal on Musk's behalf. He claims the SEC is using the accord and "near-infinite resources" to silence Musk. Musk signed the arrangement when Tesla was a less developed firm, according to court documents filed by Spiro, and SEC action risked its financing.