The Securities and Exchange Commission sued Tesla CEO Elon Musk for securities fraud Thursday over his Aug. 7 tweet when he announced he had "funding secured" to take Tesla private.
In the complaint, filed in federal court in Manhattan, the SEC said Musk made "'false and misleading public statements and omissions" that harmed investors.
The suit claims that when Musk tweeted he had "funding secured" to take Tesla private, he had not discussed any specific terms with potential sources of funding. Musk said moments later on Twitter that the only remaining contingency was a shareholder vote, when, the lawsuit alleges, there were many more contingencies.
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Following that morning's tweets, Tesla stock rallied 6 percent before trading was halted for more than an hour. Since then the stock has dropped.
The move follows weeks of investigation into the tweet.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
The suit seeks to bar Musk from serving as Tesla's CEO. It also seeks an unspecified amount of money.
“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”
Tesla stock plummeted more than 10 percent after hours Thursday, following the SEC's lawsuit.
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Since his Aug. 7 tweet, Musk and Tesla have been on a roller coaster of news, with an emotional interview in The New York Times, reports of drug use, public battles with Tesla short-sellers, and a rescuer from a Thailand cave disaster that resulted in additional lawsuits.
At the same time, several executives have left Tesla in the midst of its efforts to ramp up production and deliveries of its critical Model 3 sedan.
Musk has faced calls for his resignation and has handed off responsibility for automotive operations to a deputy, Jerome Guillen.