Fraud Charges on Elon Musk forces him to Resign
Elon Musk charged over fraudulent issues, which resulted him to step down from, Tesla’s chairman of the board and pay a fine of $20 million (roughly ₹145 crores) but stay on as CEO, US securities regulators said Saturday.
“The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla – including Musk’s removal as chairman of the Tesla board – and the payment by Musk and Tesla of financial penalties” of $20 million each, the Securities and Exchange Commission said in a statement.
The SEC had already charged Musk with securities fraud case, convincing that he misled investors over tweet on August 7 that he had “funding secured” to privatize Tesla at $420 (roughly ₹30,500) a share.
BREAKING: Elon Musk and SEC reach settlement on fraud charges that will keep Musk as CEO but force him to resign within 45 days as Chairman for 3 years, pay $20m fine and have Tesla appoint 2 new independent directors and also pay $20m fine – sources https://t.co/jn8limUSe7
— CNBC Now (@CNBCnow) September 29, 2018
This incident caused a short-time spike in Tesla’s share price, leading so-called short-sellers, who have been betting on the stock crashing for years, to lose millions.
The SEC stated Musk’s statements on Twitter were “false and misleading” and that he had never discussed the plans with officials from the company or even the potential funders.
Musk said he later decided against the plan. “When companies and corporate insiders make statements, they must act responsibly,” SEC Chairman Jay Clayton said.
Under the agreement – which Clayton said was “in the best interests of our markets and our investors, including the shareholders of Tesla” – Musk will be ineligible to serve as chairman of the board for a period of 3 years and will be replaced by an “independent chairman,” according to the SEC.
‘Prevent further market disruption’
2 “independent directors” will also be appointed by Tesla, and the company will put up a new committee of independent directors and “put in place additional controls and procedures to oversee Musk’s communications,” the SEC said.
— The Verge (@verge) September 29, 2018
The $40 million in financial penalties “will be distributed to harmed investors under a court-approved process.”
“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, the SEC’s co-director of enforcement.
SEC’s comment over issues like these
“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” SEC co-director of enforcement Steven Peikin said.
Elon Musk must step down as chairman and pay a $20 million fine over his misleading "taking Tesla private" tweet pic.twitter.com/54VVvSsoez
— QuickTake by Bloomberg (@QuickTake) September 30, 2018
Tesla’s shares reached around 14% on Friday over concerns about the company’s future after the announcement of the fraud charges against Musk, which were hard hit to the mercurial Silicon Valley entrepreneur and his company.
Public’s Opinion on him after what he is been portrayed as by the media
Musk has confused investors with emotional and seemingly erratic media appearances, including one where he appeared to smoke marijuana, and a public battle with a rescuer who helped save a group of boys trapped in a cave in Thailand, whom he termed a “pedo guy.”
Elon Musk Settled With the S.E.C., but Tesla’s Troubles Aren’t Over https://t.co/K0Ekxqc9m5
— The New York Times (@nytimes) October 1, 2018
Tesla is seeking to increase production of its Model 3, the mass-market vehicle seen as a key to the automaker’s future.
It had struggled to overcome production declines in recent months for the Model 3 but now faces other logistical issues, according to Musk.