Elon Musk mocks the SEC on Twitter as federal judge demands letter justifying his settlement

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Tesla CEO Elon Musk has taken to Twitter to mock the Securities and Exchange Commission, which recently moved to force him out as chairman of the electric car company over security fraud charges stemming from a prior tweet.

‘Just want to [say]that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!’ Musk wrote in a tweet on Thursday, as a federal judge mulls his settlement with the SEC.

Musk has often previously vilified short sellers, who bet that the price of a stock will go down, blaming them for spreading bad press and negative analysis on Tesla’s prospects.

His extraordinary slap at federal regulators comes as U.S. District Judge Alison Nathan in Manhattan said on Thursday that Musk and the SEC would have one week to justify their settlement to resolve securities fraud charges against the CEO.  

Musk and Tesla agreed to pay $20 million each, and Musk agreed to step aside as Tesla’s chairman for three years, to settle charges that Musk misled investors in a series of tweets on August 7.

Those tweets claimed that Musk had ‘funding secured’ to take Tesla private at $420 a share, sending the company’s stock briefly soaring and forcing a halt in trading. 

Tesla was not charged with fraud. The settlement was announced on September 29, two days after Musk was charged.  

Judge Nathan said the parties would have until October 11 to submit a joint letter explaining why their settlement was fair and reasonable and would not hurt the public interest.

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.

The SEC and Tesla did not immediately respond to requests for comment.

Shares of Tesla extended earlier losses after a judge issued an order to review the settlement, and were down $12.97, or 4.4 percent, to $281.83 at the closing bell on Thursday.

Coincidentally or not, Musk’s mocking tweet came about 15 minutes after the closing bell, making it less likely to be accused of violating regulations on corporate communications.

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 U.S. Circuit Court of Appeals overturned Rakoff’s rejection of a $285 million settlement between the SEC and Citigroup Inc, saying he should have given ‘significant deference’ to the regulator.

The 2nd Circuit has jurisdiction over Nathan’s court, and Pritchard said the Citigroup decision likely foreshadows approval of Musk’s settlement.

‘I do not think there is any serious chance of the settlement being rejected, based on 2nd Circuit precedent,’ Pritchard added. ‘This is just a hoop to be jumped through.’

Separately, Tesla, which has long objected to media coverage of its vehicles’ crash records, said data show its vehicles have accidents or near misses far less often than other vehicles, including when driven in Autopilot mode.

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