Elon Musk lost yet another attempt to end a 2018 settlement with the US Securities and Exchange Commission that requires oversight of some of his Tesla-related tweets.
The 2nd U.S. Circuit Court of Appeals in Manhattan rejected Musk’s argument that the 2018 consent decision is a “preliminary restriction” on his speech. Musk, who is the majority shareholder and CEO of Tesla, bought Twitter in October 2022.
If Musk had wished to retain his right to tweet without even limited internal oversight on certain Tesla-related topics, he would have had “the right to litigate and defend against the [SEC’s] charges” or to negotiate another agreement, but he chose not to,” the three-member court panel ruled Monday.
The Twitter sitter — a Tesla lawyer who is tasked with reviewing some of Musk’s business-related tweets — is one of the requirements in an SEC securities fraud deal that spawned Musk’s now-infamous “funding secured” tweet. The SEC, in a complaint filed in September 2018, alleged that Musk was lying when he tweeted on August 7 that he had “funding” for a private takeover of the company for $420 per share.
Under the settlement, Musk agreed to step down as chairman of Tesla and pay a $20 million fine. Tesla also agreed to pay a separate $20 million fine. The SEC said the charge and fine is against Tesla for not requiring disclosure controls and procedures related to Musk’s tweets.
The settlement did not end the problem with Musk’s tweets. The SEC later addressed a Musk tweet that posted previously unknown material information that Tesla would produce “approximately” 500,000 cars this year. He corrected himself hours later to clarify that he meant the company would produce 500,000 vehicles on an annual basis by the end of the year.
SEC tried to contempt him for violating the 2018 agreement. A judge in that litigation required Tesla, Musk and SEC to work out their differences and come to a new resolution. In April 2019, an agreement was reached that gave Musk the freedom to use Twitter — within certain restrictions — without fear of being scorned for violating a previous court order.
Musk can tweet as he pleases, except when it comes to specific events or financial milestones. In those cases, Musk must obtain prior approval from a securities attorney, according to the agreement filed in Manhattan federal court.
In 2022, Musk’s lawyers filed a motion to terminate the 2018 consent decree over allegations that the SEC misused it to “launch an endless, borderless investigation” into Musk’s speech and infringe his First Amendment on free speech.
U.S. District Judge Lewis Liman denied the motion and the plea agreement stood. Lawyers appealed the ruling and sent the matter to the 2nd U.S. Circuit Court of Appeals.
