A federal judge in New York will hear oral arguments next week in a lawsuit brought by the US Securities and Exchange Commission that seeks to hold Tesla CEO Elon Musk in contempt for violating a settlement deal.
Judge Alison Nathan on Tuesday set a hearing for April 4. It is unclear when she will issue a ruling.
Nathan is tasked with weighing the SEC’s request that Musk be held in contempt for violating a settlement agreement reached last year, which required he get pre-approval for social media posts about the electric car company.
Musk tweeted on February 19 that “Tesla made 0 cars in 2011, but will make around 500k in 2019.” Hours later, he posted a follow-up tweet indicating that the company will actually deliver just 400,000 cars this year.
Although Musk corrected his mistake, regulators said he had “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers,” according to court papers.
The SEC sued Musk last month, arguing that he had breached a deal struck last October that mandates he receive pre-approval of any posts with information that’s “material” to shareholders. Tesla agreed to establish a board committee to oversee those posts.
In a court filing, Tesla conceded Musk did not receive pre-approval from anyone on that committee for his February posts, but the company has since claimed that he didn’t need it.
Musk maintains he has diligently tried to follow the court settlement, and that the SEC’s request is a breach of his constitutional right to free speech.
The battle between Musk and the SEC goes back to August 2018, when Musk tweeted that he had secured funding to take Tesla private at $420 a share. Tesla’s stock soared after his announcement.
However, Musk hadn’t secured the funding, according to the SEC, and in September the regulator filed a lawsuit saying he misled investors. Tesla and Musk were each fined $20 million as part of the settlement and Musk was forced to step down as Tesla’s chairman. He’s remained Tesla’s CEO.
If Musk is found guilty of contempt, legal experts say he could face a fine, further limits to his social media use and his removal as Tesla CEO. Nathan could also toss out the settlement with the SEC, effectively reopening the agency’s litigation against Musk and Tesla.
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