Elon Musk lost another attempt to end a 2018 settlement with the US Securities and Exchange Commission that requires oversight of some of his Tesla-related tweets.
The US Court of Appeals for the Second Circuit in Manhattan rejected Musk’s argument that the consent decree reached in 2018 is a “prior restraint” on his speech. Musk, who is the majority shareholder and CEO of Tesla, bought twitter in October 2022.
If Musk had wanted to preserve his right to tweet without even limited internal oversight regarding certain Tesla-related topics, he had “the right to litigate and defend himself against the [SEC’s] charges” or negotiate a different agreement, but chose not to,” the three-judge court panel ruled Monday.
The Twitter Keeper, a Tesla lawyer who is supposed to review some of Musk’s company-related tweets, is one of the requirements in an SEC securities fraud settlement agreement that stemmed from the now-infamous tweet from Musk on “guaranteed funds.” The SEC alleged in a complaint filed in September 2018 that Musk lied when he tweeted on August 7 that he had “funds secured” for a private takeover of the company at $420 a share.
Under the agreement, Musk agreed resign as president of Tesla and pay a fine of 20 million dollars. Tesla also agreed to pay a separate penalty of $20 million. The SEC said the charge and fine against Tesla is for failing to enforce disclosure controls and procedures related to Musk’s tweets.
The settlement did not put an end to the problem with Musk’s tweets. The SEC later took issue with a tweet by Musk that released previously unknown material information that Tesla would produce “about” 500,000 cars this year. Hours later, he corrected himself to clarify that he meant that the company would be producing at an annualized rate of 500,000 vehicles by the end of the year.
The SEC sought hold him in contempt for violating the 2018 agreement. A judge in that dispute required Tesla, Musk and the SEC to resolve their differences and reach a new resolution. A an agreement was reached in April 2019 that gave Musk the freedom to use Twitter, within certain limitations, without fear of being held in contempt for violating a prior court order.
Musk can tweet however he wants, except when it comes to certain events or financial milestones. In those cases, Musk must seek prior approval from a securities attorney, according to the agreement filed in Manhattan federal court.
In 2022, Musk’s lawyers filed a motion to terminate the 2018 consent decree over allegations that the SEC had misused it to “launch an endless and limitless investigation” of Musk’s speech and infringed on his right to freedom of speech. expression of the First Amendment.
United States District Judge Lewis Liman denied the motion and the conciliation agreement was maintained. The lawyers appealed the ruling and sent the matter to the United States Court of Appeals for the Second Circuit.
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