Elon Musk is convinced that the Securities Exchange Commission is gunning for him and his free speech rights because he’s a frequent critic of the government.
“The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government,” said a letter that Musk’s lawyers filed in the Southern District of New York this week. “The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion.”
The letter was submitted in a case stemming from an SEC action against Musk for allegedly deceiving shareholders, which is within the agency’s legal purview.
That case revolves around Musk’s 2018 tweet claiming that he would be taking Tesla private at a price of $420 a share, and that he had “funding secured” to do just that. It later became clear that while he did have discussions about funding such a bid, the funding was by no means secured.
Musk settled the case by giving up his role as Tesla’s chairman, although he remains its CEO, and agreeing to have any of his future tweets that might contain material information about the company reviewed by other executives at Tesla before sending them. He and Tesla each paid a $20 million fine as well, with Musk compensating the company for its payment by purchasing an additional $20 million in Tesla stock.
Musk’s letter claims that the SEC was supposed to use the $40 million to compensate Tesla shareholders and that it still has not done so more than three years after the settlement.
The SEC did not respond to a request for comment about the letter.
This is not the first time Musk has claimed the SEC was seeking to crimp his First Amendment rights. He made the same accusation in a court filing in March 2019 when the watchdog sought to hold him in contempt of an earlier settlement because of a tweet that had an incorrect projection on Tesla’s car production.
Musk hasn’t been shy about tweeting since then, either, and it’s not clear exactly how much outside supervision his tweets get at Tesla, despite the settlement.
What is clear is that the SEC has continued to monitor his activity, and isn’t happy about everything it sees.
Earlier this month Tesla’s annual financial filing disclosed that the company has received a subpoena from the SEC “seeking information on our governance processes around compliance with the SEC settlement.”
That subpoena came days after Musk conducted a November Twitter poll asking if he should sell 10% of his shares and pledging to do so if a majority of respondents agreed, which they did. Shares of Tesla (TSLA) fell on the first trading day after the poll.
As Musk started selling his shares later in November, it became clear that most of the sales were being done in order to pay the taxes he faced on exercising soon-to-expire stock options, and not as a result the Twitter poll. Because of that exercise of options, he ended up owning more shares of Tesla at the end of the year than he did when he posted the poll.
The SEC also issued a subpoena to Tesla in December seeking “certain financial data and contracts including Tesla’s regular financial arrangements.” But Tesla said that the agency later notified the company that investigation had concluded.
Despite all those subpoenas, it does not appear that Musk has felt particularly constrained about his tweets, one of his preferred methods of communication.
This past weekend he referred to the National Highway Traffic Safety Administration as the “fun police” in a tweet over the agency requiring Tesla to drop an option that allowed drivers to play preset or custom sounds from an external speaker while the vehicle is in motion. NHTSA ruled the feature might hinder pedestrians’ ability to hear a mandatory warning sound required in all EVs, increasing the risk of a crash.
And on Thursday morning, Musk sent a tweet with an Adolph Hitler meme which portrayed the Nazi leader as saying “Stop comparing me to Justin Trudeau, I had a budget.”
The tweet was in response to news that Canadian authorities have ordered financial institutions not to interact with numerous cryptocurrency addresses tied to the country’s ongoing trucker protests. Musk is a well known advocate of cryptocurrencies.