Tesla Inc Chief Executive Elon Musk on Thursday mocked the US Securities and Exchange Commission (SEC), hours after a federal judge ordered him and the regulator to justify their settlement of securities fraud charges.
“Just want to [sic] 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 settlement last Saturday was intended to resolve charges that Musk misled investors in tweets on August 7, including that there was “funding secured” to take his Palo Alto, California-based company private at $420 per share.
Musk agreed to pay a $20 million fine, and step aside as Tesla’s chairman for three years. Tesla also accepted a $20 million fine, despite not being charged with fraud.
Musk’s latest tweet came less than four hours after US District Judge Alison Nathan in Manhattan ordered him 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.
The judge said it was her regular practice to request such letters.
Nathan “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.
Tesla declined to comment. The SEC did not respond to requests for comment on Nathan’s order and Musk’s tweet.
Shares of Tesla closed down 4.4 percent at $281.83 and fell another 2.2 percent after market hours following Musk’s tweet.
Some judges have complained about being viewed as rubber stamps for SEC settlements.
Among them was Nathan’s colleague Jed Rakoff, who had objected to the SEC’s decades-old policy of letting some corporate defendants settle without admitting or denying wrongdoing, as Musk did.
But in 2014, the 2nd US Circuit Court of Appeals overturned Rakoff’s rejection of a $285 million SEC settlement with Citigroup Inc, saying he should have given “significant deference” to the regulator.
The 2nd Circuit has jurisdiction over Nathan’s court, and lawyers said prior to Musk’s latest tweet that his settlement would likely win approval, though orders such as Nathan’s are not too common.
“In and of itself it’s not an ominous sign,” said Jordan Thomas, a partner at Labaton Sucharow and former SEC lawyer. “The vast majority of settlements like this are approved by courts.”
Pritchard said he saw no “serious chance” for Musk’s settlement to be rejected based on 2nd Circuit precedent. “This is just a hoop to be jumped through,” he said.
The settlement was announced on September 29, two days after Musk was charged.