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Elon Musk loses bid to reverse his 2018 agreement with the SEC

The potential new owner of Twitter Elon Musk still has some limitations on his tweets that most of us don’t have. They are the result of a 2018 settlement with the Securities and Exchange Commission (SEC) over his infamous “funding secured” tweet about Tesla’s privatization. Even considering Musk’s complaints that it was him forced to accept the deal and Contempt for the “bastards” at the SECU.S. District Judge Lewis Liman ruled against Musk today, leaving the agreement in place as originally written (via Reuters).

One of the things Musk wanted — but didn’t get — was for the court to stop an SEC subpoena for information to determine whether a tweet last fall containing a poll about the sale of 10 percent of his stock had been first verified under a consent agreement , under which he stands. Musk complained of an “endless investigation” that served as an attempt to “stop his exercise of First Amendment rights.”

Judge Liman noted that the court was barred from reviewing whether or not the subpoena was properly issued, but also writes that if the court had ruled, the evidence presented showed that the “SEC is clearly entitled to to investigate the matter”.

As for Musk’s motion to overturn the consent order, which claims it interferes with his “First Amendment right to be free from prior restrictions,” the judge didn’t believe his arguments, made via Eminem lyrics or otherwise. In addition to noting that “even Musk acknowledges that his right to free speech does not permit him to engage in speech that “may be considered fraudulent or otherwise in violation of securities laws,” the judge wrote:

By entering into the Consent Decree in 2018, Musk consented to the provision requiring prior approval of such written communications that contain or may reasonably contain informational material intended for Tesla or its shareholders. He cannot now complain that this provision violates his First Amendment rights.

Musk’s other arguments fell through similarly. As for his allegation of the “sheer number of claims” the agreement will entail on him and his company, the judge ruled that the SEC’s three series of inquiries were “not surprising.” The same applies to his argument that he closed the deal under “economic duress”. Judge Liman writes that if they saw it through the lens of Musk’s lawyers, it would be impossible to reach settlements, as executives could easily claim they felt “compelled,” forcing the government to expensive trials and the defendants would take option.

Musk was not forced into entering into the Consent Decree; rather for [his] own strategic purposes, [Musk], with the advice and assistance of legal counsel, voluntarily entered into these agreements to secure the benefits thereof, including finality.” Securities and Exchange Commission v. Conradt, 309 FRD 186, 187-88 (SDNY 2015). Musk cannot now attempt to withdraw the agreement he knowingly and willingly entered into by simply lamenting that he felt he had to agree to it then, but now — once the specter of the litigation is a distant memory and his Company has become his estimate, almost invincible – wish he hadn’t.

Still, all was not bad for Musk in court today — the Delaware Supreme Court sided with him against Tesla shareholders suing over the company’s stock $2.6 billion acquisition of SolarCity in 2016. CNBC reports that a loss there could have cost him more than $2 billion, which certainly sounds like economic hardship to most of us.

Update from April 27th 7:33pm ET: Added note to SolarCity verdict.

https://www.theverge.com/2022/4/27/23044743/elon-musk-tesla-sec-lawsuit-loss-consent-decree-twitter Elon Musk loses bid to reverse his 2018 agreement with the SEC

Fry Electronics Team

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