Original author /Andrew J. Hawkins
Compile / Carlos
According to the Wall Street Journal, the U.S. Securities and Exchange Commission (SEC) is investigating Tesla CEO Elon Musk and his brother Kimbal Musk for possible violations of insider trading rules by their recently sold shares.
According to the Wall Street Journal, the investigation began late last year, when Kimbal Musk sold $108 million worth of Tesla stock. And the day before the deal, Elon Musk also conducted a poll on whether he should sell a 10 percent stake in his company and promised to abide by the polls.
Elon Musk said at the time that if Congress imposed a "billionaire income tax," he would pay for those fees by selling shares. At the end of the vote, 57.9 percent of the more than 3.5 million participants voted in favor and 42.1 percent voted against, resulting in a sharp drop in Tesla's stock price.
The Wall Street Journal said That Kimbal Musk, who is also a tesla board member, sold 88,500 shares the day before his brother tweeted the poll. However, insider trading laws prohibit employees and board members from trading without prior disclosure of information.
As part of Section 10b5-1 of the U.S. Securities exchange act, employees and board members may avoid allegations of insider trading by trading at a predetermined time.
The Wall Street Journal notes that Kimball Musk did use the procedure in the past, trading stocks under the 10b5-1 rule 40 times since 2011. However, in the November 5 transaction, the disclosure did not indicate that he complied with the ordinance.
The Wall Street Journal quoted securities law experts as saying that regulators may investigate whether Musk told his brother about the vote or potential sale before Kimbar Musk sold his shares on Nov. 5, or whether Kimbar was otherwise informed of the vote and then traded.
A spokesman for the Securities and Exchange Commission declined to comment. Tesla disbanded its public relations division in 2019 and has since stopped responding to questions from reporters.
Elon Musk has been at war with the U.S. Securities and Exchange Commission (SEC) in recent weeks, accusing the SEC of conducting "endless, unfounded investigations" into him and his company. He also claimed that under the 2018 settlement, the SEC ignored its commitment to distribute a $40 million fine to Tesla shareholders. He said the SEC leaked information about the federal investigation but did not provide any specific evidence to support his claims.
The controversy dates back to 2018, when Elon Musk tweeted that he was going to take Tesla private and announced that he had "financial security," a notoriously false statement. After the tweet was posted, the SEC launched an investigation into it and concluded that Elon Maas had misled investors.
A year later, Tesla and the SEC reached a settlement, and Elon Musk's tweets about Tesla should be subject to more scrutiny. Under the settlement, tweets about the company's financial position, the number of sales or deliveries (including the estimates), and other specific subject matter must be pre-approved by the company's designated lawyer.
In February 2019, the SEC asked a federal judge to rule that Elon Musk's inaccurate tweet was in defiance of the terms of Tesla's agreement with the SEC. Musk called the SEC an attempt to "seize power unconstitutionally," while the SEC said Tesla's CEO was "flagrantly violating" the settlement agreement. Eventually, a federal judge ordered both sides to settle the issue.
On Thursday, Elon Musk tweeted that he was "setting up a case against the SEC" and declared that "this fight was not initiated by me, but I will end it."
https://www.theverge.com/2022/2/24/22949453/tesla-elon-musk-kimbal-sec-investigation-insider-trading
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