The Securities and Exchange Commission is investigating whether Tesla Inc. Chief Executive Elon Musk and his brother Kimbal violated securities laws by selling company stock late last year, according to a person familiar with the matter.
The regulator’s investigation focuses on transactions that took place just before Elon Musk polled his Twitter followers about whether he should sell a 10% stake in the company. The SEC is investigating whether insider trading rules were violated, said the person familiar with the matter, who asked not to be identified because the investigation is private.
The SEC declined to comment. Tesla, Elon and Kimbal Musk did not immediately respond to requests for comment. The investigation was previously reported by the Wall Street Journal.
Shares of Tesla plunged after the CEO’s Twitter poll on November 6, closing at the highest in five months. Tesla board member Kimbal Musk had sold 88,500 Tesla shares worth about $109 million on Nov. 5, according to a filing filed after the market closed that day.
This month, Tesla revealed that it had received a subpoena from the SEC on November 16 seeking information about its governance processes and compliance with a settlement it reached with the agency in September 2018 over Elon Musk’s tweets.
As part of that settlement, Tesla agreed to implement controls to monitor the CEO’s communications, including his tweets, after the SEC alleged that the world’s richest person had committed securities fraud by saying on the social media platform that he had obtained funds for the company to go private.
Musk and the SEC have been at odds ever since. The agency sought a judge to find the billionaire in contempt of the settlement the following year when he tweeted about Tesla’s production prospects without getting prior approval. The two sides agreed in April 2019 to modify their agreement by adding specific topics that the Tesla boss could not tweet about, or otherwise communicate in writing, without the approval of a company lawyer.
The dispute gained new momentum last week, when Musk’s attorney told a federal court that the SEC was targeting Musk and the electric car maker with a “relentless investigation” because the CEO is “an outspoken critic of the government.” “. The second has denied the accusation, and Thursday a judge refused to hold a hearing on the claims.
Bloomberg writers Ed Ludlow, Bob Van Voris, and Craig Trudell contributed to this report.