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Abu Dhabi, UAETuesday 16 October 2018

Elon Musk mocks SEC as judge demands they justify fraud settlement

The billionaire is using Twitter to share his opinions.

He tweeted tess than a week after settling fraud charges with the US Securities and Exchange Commission. AFP
He tweeted tess than a week after settling fraud charges with the US Securities and Exchange Commission. AFP

Tesla Inc's Elon Musk mocked the US Securities and Exchange Commission on Thursday, just hours after a federal judge ordered him and the regulator to justify their securities fraud settlement, which let Musk remain chief executive.

"Just want to that the Shortseller Enrichment Commission is doing incredible work," Musk, a frequent critic of investors betting against the electric car company, wrote on Twitter. "And the name change is so on point!"

The tweet came five days after Musk settled SEC charges that he misled investors in tweets on August 7, including that there was "funding secured" to take his Palo Alto, California-based company private at $420 (Dh1,542) per share.

Musk agreed to pay a $20 million fine, and step aside as Tesla's chairman for three years, to settle charges that could have forced his exit from Tesla. The company also accepted a $20 million fine, despite not being charged with fraud.

Tesla and the SEC declined requests for comment.

Former SEC lawyers questioned the wisdom of Musk's latest tweet, but said it was unlikely to jeopardise the settlement, which prevents Musk from denying wrongdoing or suggesting that the regulator's allegations were untrue.

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Read more:

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“I don't think the SEC would look at this as a denial of the facts alleged," said Peter Henning, a law professor at Wayne State University in Detroit. "But you don't take gratuitous shots at the SEC. There's no real upside."

Shares of Tesla closed down $12.97, or 4.4 percent, at $281.83, and fell another 2.1 percent to $276 following Musk's tweet after market hours.

The tweet came less than four hours after US District Judge Alison Nathan in Manhattan ordered Musk and the SEC to explain by October 11 in a joint letter why their settlement was fair and reasonable and would not hurt the public interest.

Ms Nathan said it was her regular practice to request such letters.

"She may want to know why Tesla is paying a fine because the CEO doesn't know when to shut up," said Adam Pritchard, a University of Michigan law professor and former SEC lawyer.

Musk's tweet on Thursday received more than 2,500 responses, with some users questioning the billionaire's judgement.

"Seriously? You know you still need their help convincing a judge that your penalty was sufficient... Maybe a 420M fine would have been more appropriate?" one Twitter follower said. The proposed take-private price was $420 a share.

Musk replied, "the opposite is true."