Tesla and Elon Musk have accused the Securities and Exchange Commission of failing to distribute $40 million to the company's shareholders as part of a 2018 settlement to resolve securities fraud charges.
Instead of releasing the funds to shareholders, the electric vehicle maker claims that the agency has "gone rogue" and is "weaponizing the consent decree by using it to try to muzzle and harass Mr. Musk and Tesla, while ignoring its court-ordered duty to remit $40 million that it continues to hold while Tesla’s shareholders continue to wait."
"The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government," Musk's lawyer, Alex Spiro, wrote in a letter to the U.S. District Court for the Southern District of New York. "The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in evenhanded fashion."
According to the letter, the regulator has been in possession of funds owed to Tesla investors for more than 1,200 days and has not yet announced a distribution plan. In May, the court appointed Rust Consulting to dole out the cash to investors. However, the court said in a Dec. 21 filing that the firm had not sent any status reports and ordered it to file one by Jan. 7.
The letter asks to schedule a hearing in order to look into the matter in the hopes of bringing the agency's "harassment campaign to an end, while ensuring that the SEC finally delivers, at long last, on its commitment to Tesla’s shareholders."
A spokesperson for the SEC declined to comment.
The charges against Musk came in response to his now infamous tweet in which he claimed he had "funding secured" to take Tesla private at $420 per share. The SEC filed a lawsuit against Musk claiming he made "false and misleading" statements about Tesla’s privatization plans. The lawsuit also alleged he "knew or was reckless in not knowing" that his statements were false and/or misleading.
In addition to Tesla and Musk each paying $20 million in fines, the settlement requires Musk to vet any tweets related to Tesla with a lawyer before sending them out. Tesla was also required to add two new independent board directors and Musk was stripped of his chairman title. Under the terms of the settlement, Musk and Tesla neither admitted nor denied wrongdoing.
The letter to the court comes after Tesla revealed in a recent 10-K filing that the agency issued a subpoena in November 2021 seeking information on the company’s "governance processes around compliance with the SEC settlement, as amended."
The subpoena came shortly after Musk issued a poll on Twitter asking if he should sell 10% of his stake in Tesla.