Musk settles—out as Tesla chairman, owes $20 million in penalties

Enlarge (credit: Joshua Lott/Getty Image)

Elon Musk reached a settlement today with the Securities and Exchange Commission (SEC) on a charge of securities fraud. Within the next 45 days, Musk will have to step down as chairman of Tesla and will be ineligible to return to that post for the next three years. However, Musk can continue in his role as the company’s CEO. Additionally, Tesla was charged with “failing to have required disclosure controls and procedures relating to Musk’s tweets”—a matter which it promptly settled.

In August, Musk tweeted that he was taking the car maker private and had “funding secured” to do so at the price of $420 a share. The result was a significant spike in Tesla’s share price that was reversed when it turned out that there was no such funding—nor much possibility of taking Tesla private under the circumstances Musk had promised.

The SEC was deluged with comments from investors—both short and long—who lost out as a result of Musk’s tweets. The agency quickly began an investigation into the matter and proposed a settlement with Musk that he rejected, at which point the SEC sued him for fraud. Had that case gone to trial—a process in which the SEC overwhelmingly wins—the consequences for Musk could have been much greater; the SEC could have barred Musk from serving as an officer or director in any public company.