Elon Musk And his brother Kimbal Musk are being investigated by Securities and Exchange Commission (SEC, for its acronym in English) for trafficking privileged information in relation to Tesla shares.
The investigation began in late 2021 when Kimbal and Elon Musk sold 108 million shares of Tesla. This happened a day before that survey that the latter did on Twitter, where he asked if he should sell 10% of his shares in the company.
Musk would allegedly sell those shares to pay capital gains taxes. Just a day earlier his brother, who is also on the Tesla board of directors, sold 88,500 shares. The buying/selling of securities based on information that has not yet been made public is prohibited.
Employees and/or members of boards of directors can buy or sell shares through an established procedure for this type of transaction. It is called the 10b5-1 rule and must be done at predetermined times. You must advance the price, quantity and dates. Both the seller and the broker they are absolutely prohibited from accessing information that has not yet been made public.
Kimbal Musk did not use the 10b5-1 procedure to make the sale of his shares on November 5. Elon Musk published the survey, a day later, on November 6. Now, according to Wall Street Journalthe US Securities and Exchange Commission is in the midst of an investigation into both to determine if Elon tipped his brother off about the survey and possible subsequent sale.
Elon Musk versus the SEC
Elon Musk and the American Securities and Exchange Commission (SEC) have been in a bloody war for some years. the self-proclaimed crypto king has made public accusations against the agency arguing that it is the victim of harassment and unfounded and endless investigations.
In addition, Elon Musk assures that the SEC has leaked information about federal investigations that are being carried out, although he has not presented evidence of such an accusation.
The beginning of the problems between the two began in 2018, when Elon Musk announced on Twitter that he would withdraw Tesla shares from the market and repurchase them all at a value of $420. The SEC determined that the director of the electric car company had misled shareholders.
From there, after an agreement, if Elon Musk wants to tweet about certain topics related to investment, Tesla shares, sales, or car delivery figures, he must go through the approval of a lawyer.
In 2019, the SEC asked a federal judge in the United States to sanction Musk for contempt for submitting “inaccurate” information as it allegedly violated the terms of the agreement. The Tesla manager responded that the US Securities and Exchange Commission showed an abuse of power.
The judge, after listening to both parties, determined that Elon Musk and the SEC should resolve their issues out of court. But last Tuesday, February 23, he posted a tweet saying that he was collecting evidence against the SEC: “I didn’t start this fight, but I will finish it, he wrote.