
Elon Musk Settles SEC Fraud Charges - omarchowdhury
https://www.sec.gov/news/press-release/2018-226
======
headmelted
This really doesn't change the status quo at Tesla at all.

We can armchair quarterback the company all day long about whether Musk is
replaceable or not, but short of folks that have direct experience within the
company we don't _really_ know. What we can say with some confidence is that
if Musk were _really_ removed in any meaningful way the market would crush
them utterly within hours. The shareholders want Stark Industries, not some
near-insolvent car company with severe production shortfalls and a teetering
runway.

~~~
jpalomaki
Professor Aswath Damodaran gave his thoughts on this topic at Nordic Business
Forum. (IIRC disclaimer here) He said that he sees some parallels to Steve
Jobs, who once almost destroyed Apple and then later saved it - the difference
being that on the second time he had Tim Cook. If Musk can find (or if he
already has - I have no idea of Tesla management) his own "Tim Cook", then the
future of Tesla looks much brighter.

For me this makes sense and I've seen it also elsewhere. The person with lots
of energy and ideas may not be the best person to execute things in a
corporate context.

~~~
everdev
As humans, we tend to see patterns wether they're there or not. Jobs and Musk
are different people running different types of companies in different eras.
There are probably only a small number of people who really understand how
Jobs made or Musk makes business critical decisions day in and day out and I'd
wager on the opposite that they probably do things fairly differently even if
in the outside we see similarities (passion, vision, etc.)

~~~
Faark
Eh. Yes, we can only use known information and especially with little info,
the patterns we perceive won't always be perfect. But applying those labels
seems to have enormous value anyway. Reddit recently likes to compare Musk to
Trump. And while i disagree with that comparison on most aspects, it did help
me realize their social media usage patterns are a lot more similar than I'd
like. Of cause this particular comparison got a lot harder to do, now, since
the US seems to hold a CEO & Chairman to higher standards...

------
toymachine
Honest question: Does it really matter if he loses the chairman role? Or even
if he lost the CEO role? If he was busted down to VP of Engineering he would
still be a major shareholder and everyone would did what he said right? He
just wouldn't have any "official" corporate leader responsibilities (quarterly
calls, etc). Or am I totally wrong?

~~~
slg
He will still be the most powerful single person at Tesla, but this at least
opens the door for him to not be the most powerful entity at Tesla. There is
no way of knowing when or even if the Tesla board will start saying no to
Musk, but this at least makes it possible for them in the future. That is a
good thing in my opinion.

In fact, I think a Tesla shareholder should be pretty happy with this
settlement. The $20m fine at a time when Tesla is already running low of cash
is certainly tough news, but every other part of this settlement is probably
good news for the company's long term health. It is also obviously a lot
better than some of the punishments people were talking about earlier this
week.

~~~
DennisP
Musk is covering the fine to Tesla by buying $20M of Tesla stock.
[https://www.nytimes.com/2018/09/29/business/tesla-musk-
sec-s...](https://www.nytimes.com/2018/09/29/business/tesla-musk-sec-
settlement.html)

~~~
kyle_v
I dont see how that's covering if he's still getting $20m of tesla stock

~~~
URSpider94
Assuming he is buying newly-issued shares from Tesla, then the money goes
directly into their treasury. So, the company will have $20MM more in cash
than it did the day before.

~~~
nathanvanfleet
He is still getting something out of that transaction. That's like saying
buying food at a restaurant is a donation.

~~~
cpuguy83
I'm no finance person, lawyer, or anything like that. But I suspect that he
can't just give Tesla money and it has to be in exchange for something, such
as stock.

------
randomsearch
This is good news for nerds who believe tech can be used for more than
developing advertising platforms.

Everyone anywhere near Elon should do one thing: encourage him to get the hell
off Twitter. Social media is bad for everyone, but it seems worse for certain
personality types.

Please Elon, quit twitter. Even for a year.

~~~
nostrebored
Twitter seems more like a symptom than a root cause here.

~~~
jrumbut
I once heard that root causes are almost never fixable, so pretty often the
best that can be done is a few levels up.

The root cause of anything is probably something like mortality, human
frailty, the laws of physics. We are very far from fixing any of those.

Twitter on the other hand can be changed, and probably some people on this
very site work at Twitter and can (and should!) make socially responsible
changes. It's not the root cause of anything but it has plenty of influence.

~~~
randomsearch
This is an incredible insight. Thank you so much for sharing it.

------
minimaxir
A bit anticlimactic. The only reason the SEC brought charges publicly was
because Musk refused the _first_ settlement offer (with similar conditions)
anyways.

~~~
gammateam
well it turned into a classic no admit no deny settlement

this is a much better settlement and easier to swallow.

if he had to admit it then the criminal charge would have been emboldened.
unfortunately the settlement itself can still be used as ammunition, but it is
contains no admission (or denial) of guilt.

~~~
adventured
The proposal they previously rejected had an offer of no admission of guilt as
well.[1] It's a very slightly worse settlement now, the apparent duration that
he is barred from the chairmanship was increased by a year.

Most likely Musk wanted the optics of declaring himself innocent, rejecting
the offer and feigning a fight. I'd be surprised if everyone around him have
not been encouraging him to settle, the downside risk was far too great vs the
modest settlement pain.

[1] [https://www.cnbc.com/2018/09/28/teslas-musk-pulled-plug-
on-s...](https://www.cnbc.com/2018/09/28/teslas-musk-pulled-plug-on-
settlement-with-sec-at-last-minute.html)

~~~
jsight
I've been wondering if he didn't settle because he wanted to gauge the
reaction to fighting it out. Like you, I bet there was a lot of pressure put
on by stakeholders to negotiate a settlement once it became public.

------
pavlov
At the last Tesla shareholder meeting five months ago, some investors wanted
Musk to give up the chairman post (while remaining CEO of course) but he
refused:
[https://www.google.com/amp/s/www.apnews.com/amp/386447de1b8a...](https://www.google.com/amp/s/www.apnews.com/amp/386447de1b8a45f0a8ed8b95224479cf)

Would have saved $40M cash and billions in shareholder value if he’d taken the
hint then. Nobody should think themselves that irreplaceable.

~~~
ec109685
If he wasn’t chairman, they couldn’t have taken that away from him in the
settlement, so he might have suffered a different punishment.

~~~
pavlov
My train of thought was that Musk probably wouldn’t have ended up tweeting
“funding secured” in a situation where he’d be accountable to an external
chairman of the board. A bit of governance might have been useful these past
months.

~~~
cryptonector
Exactly. It wouldn't have been his place to negotiate, not without chairman
approval, and certainly not by himself. There would have been an adult in the
room.

------
peterarmstrong
As a fan (not shareholder, unfortunately) of Tesla, this is great news. When I
think of Elon Musk I sometimes think of the movie version of Patton. Hopefully
this gets him to settle down on a bit of the drama, and focus on making Tesla
succeed and getting SpaceX to Mars...

~~~
mbesto
Honest question - what's the rationale of being a fan of a CEO? I can
understand being a fan of an actor, a sports professional, but a CEO? I
sincerely don't get it.

~~~
mikeg8
I am a pretty big fan of Elon, I’ll explain how I think about it. To me, it’s
not about being a CEO, it is about rooting for a visionary. I want Elon, and
his missions via various business ventures, to succeed. The success of an
actor, athlete, etc will have zero inpact on me personally. Some of the things
Elon and team are trying to accomplish, could materially change my life, as
well as many others. It feels much more real, more connected to me. Yes, maybe
his methods/antics are silly at times, but he’s human, and trying really
difficult things that may improve the world (subjectively). Why wouldn’t you
want to be a fan of the things he is doing?

~~~
mbesto
Fair enough.

> Some of the things Elon and team are trying to accomplish, could materially
> change my life

Like what specifically?

> Why wouldn’t you want to be a fan of the things he is doing?

I guess I could be a fan of _what_ he is doing, but not _how_ he is doing it.
A few reasons:

\- Concentration of wealth to him personally at the expense of my tax dollars
(just look at how much of Tesla has been subsidized by the government)

\- Tesla is questionably a sustainable company. I think Musk is a visionary
from a product/market perspective, but his operating capabilities are
questionable.

\- You don't need cheerleaders for a more sustainable environment, you need
paying customers of environmentally friendly products/services and operators
who are fiscally responsible to deliver those goods. I would be cheering like
you if he spent more time figuring out how to make his supply chain
sustainable and less time touting himself on twitter and attacking his
perceived enemies.

\- He's demonstrated that he believes he is above the law (SEC) and above
respectful discourse ("pedo" comments). Certainly not the type of leader I
want my future kids to follow.

I grew up watching Michael Jordan and was a huge fan of what MJ did for the
game of basketball. As I grew older, I learned he has a huge gambling problem
(that got him into a lot of trouble), he regularly bullied players (teammates
and friendly opponents) and is generally not a likable person.

In other words, the end doesn't justify the means for me.

~~~
mikeg8
> Like what specifically?

Owning an electric vehicle. I'm currently starting a house remodel, if I could
afford the solar roof, I would get one. I still may get the power wall as an
energy backup. The price points of these are all high, but the assumption is
that as the tech and supply improve, the price drops.

> Concentration of wealth to him personally at the expense of my tax dollars

Agree Elon has accumulated a lot of wealth but he also invests a lot of his
wealth into businesses and takes risks with his money. Capitalism rewards
people with more wealth if they are good at what they do, I don't mind that. I
also don't think he hoards it in the same way as other billionaires. RE
Subsidies - other energy companies also receive large subsidies. I may not
agree with subsidizing these companies but I prefer to subsidize clean energy
ventures vs coal.

> Tesla is questionably a sustainable company.

We should all find out in the next year or two, will be fun to watch.

> I think Musk is a visionary from a product/market perspective, but his
> operating capabilities are questionable.

If first part is true, does second part matter? Not to me.

> You don't need cheerleaders for a more sustainable environment, you need
> paying customers of environmentally friendly products/services and operators
> who are fiscally responsible to deliver those goods. I would be cheering
> like you if he spent more time figuring out how to make his supply chain
> sustainable and less time touting himself on twitter and attacking his
> perceived enemies.

Totally agree with you on this part.

> I grew up watching Michael Jordan and was a huge fan of what MJ did for the
> game of basketball. As I grew older, I learned he has a huge gambling
> problem (that got him into a lot of trouble), he regularly bullied players
> (teammates and friendly opponents) and is generally not a likable person.

Good points. I think Elon should give his teams more credit and I've read
stories he can be an asshole- I'm not a supporter of the Steve Jobs bullying
mindset and believe you can succeed while being nice. Maybe this is one of his
biggest areas for improvement. But I've also seen a lot of interviews where
Elon seems sensitive, kind of misunderstood and like he _really_ cares about
doing a good job and doing the right thing. He's definitely not perfect and I
think people expect him to be which has got to be tough.

~~~
mbesto
Thanks for the thoughtful reply!

------
londev
Elon Musk and Tesla are still facing:

\- A DOJ criminal enquiry into the same 420 tweet

\- A whistleblower suit about misrepresentation of its rate of vehicle and
battery production

\- Another whistleblower suit about covering up a large theft and a narcotics
ring

\- A class action over racism

\- Complaints about union busting

\- A defamation suit over pedo accusations

\- Investor class actions over the Musk family bailout acquisition of Solar
City

And probably lots more that we don’t yet know about.

That so many people in tech are holding this stock and are even proud of the
company is shocking to me. Sustainability can only be pushed forward with
sustainable finances and the Tesla balance sheet is a horror show.

Tesla will file for bankruptcy protection in 2019.

~~~
mellow-lake-day
>Tesla will file for bankruptcy protection in 2019.

We've been hearing this bankruptcy thing every year without fail since the
company was founded 15 years ago. This doesn't mean the company won't go
bankrupt but that they are more resilient than given credit for.

>And probably lots more that we don’t yet know about.

Those court cases you listed are daily life for big companies. Intel has been
tied in a court case with the EU since 2001. Google just settled a court case.
Google is also facing a bunch of other court cases. Tesla gets the spotlight
but look around.

~~~
Tade0
_This doesn 't mean the company won't go bankrupt but that they are more
resilient than given credit for._

The Bloomberg Model 3 counter registered a sharp dip, so the risk is real, but
my take is that it doesn't matter.

There is an unprecedented amount of decent EV models coming up for model year
2019. This goal has been achieved and I believe Tesla's stock always reflected
the rate at which we were getting there, not the company's long-term
viability.

~~~
HeadsUpHigh
The Bloomberg model 3 counter was using r/teslamotors as a source of VINs.
When the ramp up was happening people were registering VINs all the time but
now the sub has lost interest in VINs so the numbers are dropping.

~~~
londev
It uses VINs registered by Tesla themselves now, weighted with a few other
factors according to @tsrandall on Twitter.

------
reiderrider
I traded in an 8 year old POS and bought the model 3 yesterday. Elon and his
team are headed in the right direction regardless of this drama.

~~~
zaroth
If you took delivery yesterday, do mind if I ask what configuration and when
it was you put down the $2,500?

~~~
electriclove
Put $2,500 down at end of July and received my MSM Dual Motor yesterday.

~~~
DennisP
Wow, I thought they were still working through the early deposits.

~~~
rcMgD2BwE72F
Deposits are global, deliveries are US and Canada only.

------
WheelsAtLarge
Good settlement for Musk and Tesla. They should have added a review of his
tweets by the board or someone. I suspect he'll get in trouble again by
sending something stupid.

Seems to me that Twitter has become a quick way to create or destroy your
career.

One tweet, $40 mil...

~~~
JosephHatfield
The SEC press release reported that the settlement requires that Tesla put in
place additional controls and procedures to oversee Musk’s communications.
That seems likely to include controls over his Tweets.

~~~
WheelsAtLarge
Good point, that's going to help him and Tesla a lot. All his tweeting was
distracting from the good things they are doing.

------
cnorgate
Irony is he will probably burn more shorts with this announcement than he did
with the initial set of tweets... and the SEC helped him do it this time
around!

~~~
hn_throwaway_99
Related question regarding burning the shorts. The SEC said the $40 million in
fines would go to aggrieved investors in a court approved process. But the
people who were hurt the most by Musk's initial tweet were short sellers with
stop loss orders. But I don't think they would classify as "investors",
considering they profit when TSLA goes down.

Does anyone know how this process works, or do you think short sellers would
have a claim to some of that $40 million?

~~~
dragontamer
I don't think so.

The biggest burns are the people who bought in at $370 thinking that Elon Musk
would be selling the company at $420.

Shorts may have gotten margin called, but the stock was skyrocketing on the
news. Everyone who bought stocks during the tweet in question is basically
able to sue for damages.

------
djanogo
I seriously wonder if Musk thought this up to catch people short over the
weekend, by leaking that he didn't want to settle on Friday and then settling
over the weekend.

As long as he got his "friends and family board" he probably will do what he
has been doing. I doubt 2 new directors will be able to control him.

~~~
dahdum
If it was his plan to tank the stock 14% on Friday, thinking it would pop back
up and beyond Monday to hurt the shorts he’s been smoking far too much.

After hours trading is only up .5% from close, Friday morning it was already
down like 12% when the market opened.

~~~
hn_throwaway_99
> After hours trading is only up .5% from close

That number was calculated as of 8PM Friday. It doesn't include the impact of
this news.

~~~
dahdum
Thank you, don’t know how I spaced that.

------
gurumeditations
What does stepping down as chairman but not CEO entail practically?

~~~
threeseed
He’s lost control of the board.

Which means they have the ability to remove him as CEO.

------
ben_w
That was quick. Probably for the best, given the obvious trouble overwork has
been causing him.

Interesting to note specifically the point about controls on his Twitter
account that could’ve prevented this.

~~~
threeseed
The problems with Musk are far more than just his overwork. There’s a lot to
work on.

There’s been persistent rumours of serious drug use. His outbursts are erratic
and unhinged ie. calling a diver a paedophile on multiple occasions. His
private life is extraordinary for a CEO to say the least. He clearly lacks
self control ie Twitter and Joe Rogen show. And his I’m the victim attitude
towards short sellers, media etc is pretty unparalleled.

I suspect that losing the Chairman position is the last step before being
removed as CEO.

~~~
fermienrico
All of this is from last 6-12 months. Let's not forget what public opinion was
without the news cycle telling us what to think.

I am not saying his public statements were bad. Just trying to put some
perspective. Also, smoking marijuana is ok and legal. He took a puff and all
of a sudden he is a drug addict. WTF!?

Just watch his interview Salman Khan (Khan academy) or look up his
accomplishments.

~~~
dlgeek
> Also, smoking marijuana is ok and legal.

It is illegal on a federal level. And as someone who runs a company with
multi-billion-dollar National Defense contracts, which are almost certainly
contingent on him holding a security clearance, it shows an incredible lack of
judgement to consume marijuana publicly.

~~~
sokoloff
> It is legal on a federal level.

You mean to say illegal.

~~~
dlgeek
Yes, thank you. Updated.

------
Aloha
Perhaps this will result in some 'adult supervision' at Tesla.

I'm skeptical however.

------
refurb
Imagine being the Tesla board or his lawyer. Just yesterday he made a stand
that he would never settle and here we are.

I’m assuming over the past 24-48 hours it’s been a full court press of
everyone trying to talk some sense into Elon. Glad they succeeded!

~~~
alexandros
I follow this stuff pretty closely and I haven't seen any mention of him
making a stand and saying he'd never settle. All I've seen is an article
referring to "sources" that said he or his team rejected a specific
settlement. Can you point me to your source for the claim that he'd never
settle?

~~~
refurb
_Musk reportedly refused to sign the deal at the last minute because he felt
he would not be truthful to himself and wouldn 't have been able to live with
the idea he'd agreed to accept a settlement and any associated blemish._

[https://www.autoblog.com/2018/09/28/elon-musk-walked-
settlem...](https://www.autoblog.com/2018/09/28/elon-musk-walked-settlement-
sec/)

~~~
alexandros
Ok, so this is an article referring to some other reporting, which was somehow
sourced itself. Suffice to say that factoid should come with significant
uncertainty attached.

------
jimrandomh
So Musk is stepping down as chairman of the board at Tesla, but one thing this
doesn't really address is whether he'll remain as CEO. I presume that decision
will be made by the new (larger) board of directors?

~~~
alexandros
you never know, the expanded board might actually be suicidal and choose to
kill the goose that lays the golden eggs. I don't think they're that deranged,
but you never know.

~~~
threeseed
Tesla doesn’t need Musk right now.

They need a serious executive from a former car company who has experience in
quiet, deliberate execution. Lots of companies are making cars without
anywhere near the same levels of fanfare.

~~~
meowface
I disagree. Musk is the face of the company and the brand. Consumers will be
less interested if he's ousted against his will and no longer involved. Tesla
might not die, but I don't think they'd be as successful without him.

~~~
threeseed
Pretty sure consumers would be happier about having a car that is available to
buy and doesn’t have major quality issues.

~~~
stevew20
I disagree. Musk as CEO drove Tesla, against every estimate I've seen or heard
of, to be profitable. Prior to musk, the cars didn't exist... So they were
unavailable to buy. And I don't see how changing him out will fix quality
issues, other than having a future CEO halt innovation in favor of bug
hunting... Which would be the start of a quick end for Tesla. They are built
on innovation.

~~~
threeseed
Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

And you can be an enterprise CEO and still innovate as a company eg. Apple,
Microsoft, Mercedes-Benz.

~~~
twblalock
> Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

I guess that’s the new meme about Musk now, but I see no reason to believe it.
Plenty of startup CEOs have done well after their companies became
enterprises. Larry Ellison and Bill Gates and Jeff Bezos are obvious examples.
So is Steve Jobs, who came back to Apple after a decade of absence and rebuilt
the company.

~~~
s73v3r_
Some have, but what are the numbers on that? Do more handle the switch ok (not
even great, but in the "The company isn't going to tank" sense), or do more
have problems and need to be replaced, if only for a while?

------
toss1
This seems like a definite plus for all involved.

The Board and Chair set the overall strategy, while the CEO executes. In the
next few years, the strategy is already clear -- execute on the Model 3, Model
S & Roadster upgrades, Tucks, and solar products. The board should just be a
background process for a while, while the pressure is on the CEO. By the time
he gets his 'Chairman License' back, it may be time to update strategy.

Meanwhile, the SEC notches a "win", the investors can go back to their
regularly scheduled short-long bickering, and Elon can focus more on
delivering.

------
apendleton
Can he remain on the board as a regular board member? It only says he's
stepping down as (and forbidden for three years from being) chair.

~~~
notatoad
I would assume yes, but he wouldn't be eligible for either of the two new
independent board seats and can't keep the chairman's seat, so for him to
remain on the board would require one of the existing board members to give up
their seat to him.

~~~
zwily
Not if an existing board member becomes chairman.

------
e40
Anyone know the difference between the proposed settlement he turned down and
the one he accepted? I'm very curious!

~~~
kentm
[https://www.nytimes.com/2018/09/28/business/elon-musk-
tesla-...](https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec-
deal.html)

 _The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as
chairman of Tesla within 45 days and not resume that post for two years. The
company, also a party to the proposed agreement, would add two new directors
to its board. Mr. Musk and the company would pay tens of millions of dollars
in fines, according to the people, who requested anonymity because they were
not authorized to speak publicly._

------
herpderperator
> Musk and Tesla will each pay a separate $20 million penalty. The $40 million
> in penalties will be distributed to harmed investors under a court-approved
> process.

Well, the stock has done somersaults in all directions since then (benefiting
both longs and shorts.) I wonder who would be eligible for part of this
payout.

~~~
almostApatriot1
yeah, The SEC charge probably harmed as many investors

~~~
michaelt
There are some crimes that are so blatant, public and obvious that the
regulators _have_ to punish you, as any other option would make it look like
the regulators were so ineffectual and weak there were effectively no rules.

~~~
AnthonyMouse
Filing public charges requesting his removal as CEO even though they weren't
seeking that in the settlement seems like a calculated move to maximize the
impact to the share price and thereby force a quick settlement. It was
evidently effective, but it was a hell of an expensive way to win if you're
measuring winning in terms of protecting investors. Anyone who got stop loss'd
out of their shares has a right to be displeased.

~~~
michaelt

      it was a hell of an expensive way to win
      if you're measuring winning in terms of
      protecting investors.
    

Not at all. The SEC is thinking not in terms of this one crime, but in terms
of the hundred CEOs who will feel tempted to commit securities fraud in the
future, and the hundreds of thousands of investors who will fear such fraud.

Will they think "Remember Elon Musk, he got his ass kicked at high cost to
himself and his investors, nobody does it" or will they think "Remember Elon
Musk, he did this and got away scot free, everyone does it" ?

That's the choice facing the SEC, and for obvious reasons they chose the
former.

~~~
AnthonyMouse
> Not at all. The SEC is thinking not in terms of this one crime, but in terms
> of the hundred CEOs who will feel tempted to commit securities fraud in the
> future, and the hundreds of thousands of investors who will fear such fraud.

The deterrence argument can be used to justify anything. Why don't we behead
the entire families of petty thieves? Think of the millions of other thieves
who would be deterred.

It's a false dichotomy. The choices aren't "scott free" or "nuclear option"
\-- if their case was as strong as is being assumed, all they would have had
to do is ask for what they got in the settlement and then get that in the
proceeding. It wouldn't even remove the incentive to settle because that still
allows them to avoid a determination of guilt.

They could also have just given the settlement negotiations more time before
making a public charge to begin with. Give the other side's lawyers a chance
to explain things to their client for a while first.

------
gok
So SpaceX isn't going public any time soon.

~~~
acjacobson
Musk has said publicly that he doesn't want SpaceX to be public because short
term market interests and pressures will likely override his goal of getting
to Mars. In truth he doesn't want Tesla to be public either, but it was the
only way to get the needed capital.

------
woodandsteel
This is a pretty mild punishment compared to the sorts of things the SEC has
the power to do, like getting Musk banned for life from any executive position
in any company, forcing him to get rid of all his ownership in Tesla, and
fining him many billions of dollars.

That the SEC settled so quickly and for so little makes me think they believed
they couldn't get any more to stand up in court. I assume that Musk refused a
more harsh earlier settlement because he was aware of this. So he played
chicken with the SEC, and the SEC backed down.

It would be really good, though, if Musk learned a lesson from all this and
decided to be more responsible in his communications.

~~~
squaresmile
That's a weird narrative you are saying. SEC settled quickly and little
because this is not a "bad" security fraud. There's little reason to punish
him harshly since he probably doesn't have malicious intent. The punishment
has to fit the crime after all. No reason for the SEC to destroy a person and
company over a tweet. They have to have some punishments though because the
fraud was too obvious.

The Thursday's failed settlement was slightly better that this one too. SEC's
case is likely to hold up in court because Musk's recklessness was too obvious
but the court's punishment would probably be similar to the settlement.

~~~
woodandsteel
You are just saying what I said but in different words.

------
kbumsik
I don't know much about the America's law system, but I heard DOJ is still
investigating. Does this settlement would affect the DOJ? How does the DOJ
isvestigation differs from the SEC's case?

~~~
jhall1468
The biggest difference is the burden of proof. A civil case requires a
preponderance of evidence. A criminal case is beyond a reasonable doubt. The
difference is absolutely enormous. There aren't going to be criminal charges.

------
guylepage3
I wonder if the SEC will disclose the persons that end up receiving
compensation for the $40M to be distributed amongst "harmed" investors? My
hope is that sophisticated investors are excluded from the compensated group
as they know how to manage and leverage risk where as the retail investor does
not. The retail investor is the one who would have been harmed in this
instance.

------
village-idiot
Settling was clearly intelligent. My only fear now is that he'll tweet
something dumb in the near future and get the SEC hammer dropped on him.

------
objektif
Wow ok this is a pretty good outcome for TSLA and Elon.

------
bhauer
Side question: Will this change see the adoption of traditional marketing and
advertising tactics by Tesla? To date, it seems that word-of-mouth and hype
generated by an enigmatic (charismatic to some) CEO were sufficient to spread
rumors and excitement to all reaches.

Without that social media hype process, are Tesla commercials in our near
future?

------
dhnsmakala
Is this the most expensive tweet in the world?

~~~
packetized
no, Kylie’s Snapchat tweets were almost certainly more expensive (for $SNAP)

~~~
deathanatos
The news of the SEC investigation seems to be the cause behind the stock's
recent drop from $307/share to $270/share, though; if I'm doing the math
right, that 12% translates to ~$6.3B worth of value. Kylie Jenner's tweet
"only" erased $1.3B of stock value. So, I think Elon has her beat.

That still doesn't seem to be enough to be the most expensive tweet, though.
That honor seems to be this tweet[1], where a finance firm "Selerity" tweeted
Twitter's missed earnings report prior to Twitter really announcing it,
costing Twitter ~25% or $8B. (The earnings report was uploaded early to the
investor relation's page on Nasdaq, apparently, and it showed that Twitter
missed its earnings.)

[1]:
[https://www.bbc.com/news/technology-32511932](https://www.bbc.com/news/technology-32511932)

~~~
sokoloff
Selerity tweeted content that was already posted on Twitter's IR site. That
$8B was likely to evaporate the following day anyway. (Weather forecasters who
predict a hurricane don't cause the billions in hurricane losses either.)

Social media gaffes of the "optional" variety (Kylie, Elon, Roseanne) are a
different category IMO.

------
nraynaud
He hated taking this company public, I don’t think it’s warming him to the
idea of public markets.

------
JayDoubleu
it was he's plan all along (this + weed stuff). He couldn't just quit tesla
and they just made him chairman for the next 25 years. Not this solves all of
hes problems. He can finally focus on spacex

------
advisedwang
But he'll still be CEO?

~~~
vermontdevil
Yes. Just not chairman and no control over board.

------
PeterMikhailov
I assume the SEC's settlement with Musk is supposed to be punitive in some
way.

Can someone much smarter than me explain how Musk buying 20 million dollars of
Tesla stock is punitive?

------
TheSpiceIsLife
What will Elon Musk do next?

The media must be chomping at the bit!

Will he reign himself in, or will the circus continue?

------
68c12c16
Is there any way that we could receive similar settlement compensations from
the President of the US for his morning tweets? I personally lost a few
thousands of dollars due to the sudden stock/cryptocurrency market crash as a
result of his tweets in the past few months this year...

------
remcob
> The $40 million in penalties will be distributed to harmed investors under a
> court-approved process.

Does that mean the people who got their shorts called? That is kind-of the
opposite of being an investor. It would be odd if Tesla would have to look
after their best interest.

------
techntoke
Title should include that he settled For (4) $20 million. Haha.

------
vagab0nd
Maybe OT but, how would the 40m likely be used by the SEC?

~~~
perennate
The article says:

> The $40 million in penalties will be distributed to harmed investors under a
> court-approved process.

------
tuxidomasx
Well, that escalated (and got resolved) quickly.

------
purplezooey
That whole thing with the 'going private' was just a tantrum to hurt all the
shorts. It worked in the short term, if you were patient you got rewarded.

~~~
pyrale
Shorting is not merely a matter of patience. Some people use barrier products,
or can't face margin calls.

------
compcoffee
Elizabeth Holmes also settled with the SEC, for what it's worth. DoJ
investigation ongoing...

------
harshulpandav
A $40 Million Tweet. Is it not a Guinness World Record yet?

------
msie
The crazy things that love causes one to do.

------
icf80
did he plan this?

------
twblalock
There was never any chance Musk would have been banned from running public
companies. If the SEC had wanted that, they never would have offered a
settlement in the first place. They were just playing hardball to get a deal.

There was too much hysteria in the coverage of, and reaction to, this whole
affair.

~~~
cwyers
Musk is agreeing to step down as chairman of the board (while staying CEO) and
Tesla is appointing two new independent directors. It's a significant
curtailing of his power over Tesla. How was the coverage overplayed?

~~~
dnomad
The psychodrama Musk causes is far more interesting than anything Musk does.
The guy is just a widget maker but his name is enough to summon outraged
hordes all desperate for his failure. This kind of naked ressentiment is
something that, until recently, you didn't see in the West. The other side of
structural inequality is probably this basic need to see the wealthy and
powerful suffer, particularly those who have the pretense to declare
themselves do gooders.

> Musk is agreeing to step down as chairman of the board (while staying CEO)
> and Tesla is appointing two new independent directors. It's a significant
> curtailing of his power over Tesla. How was the coverage overplayed?

The obsession with Musk is way overplayed at this point. The idea that people
care about Tesla at all is laughable. At this point it's all about the desire
to see their betters brought low.

~~~
Latteland
I agree with your comments about the naked interest in seeing him fail, but
disagree with the cause. I think the people who want him to fail are more
linked to supporting the status quo, in car companies, gas production, hating
the idea of evs helping to reduce greenhouse gasses, stock shorters of Tesla,
who are often some of those things. My dad fits in this camp. I haven't come
across this from people who are jealous of rich people or concerned about
income inequality. I see these rabid anti Tesla people are mostly rich,
conservatives.

------
fermienrico
I think this is the best outcome we can have (although there might be other
lawsuits from the short sellers).

Elon will learn a hard lesson, there will be a committee and procedures to
control his communication channels. He will still be CEO and the spirit of
Tesla will be unharmed in the long run.

As much as I see myself as an objective person, Elon is genuine in his passion
and his vision. Derailing him to jail time or prison would be a net loss for
humanity, however objectively and legally inconsistent it may be.

Edit: The news cycle and PR things have a very short term memory. Just a year
ago, people were praising him for his style and overall he was considered an
extraordinary leader, CEO and a visionary.

~~~
archagon
> _Derailing him to jail time or prison would be a net loss for humanity,
> however objectively and legally inconsistent it may be._

I hate this perspective. As a member of humanity, I want everyone to face
equal justice, no matter how pivotal to a particular project or movement they
may be. There will always be more visionaries.

Anything else will eventually and inevitably lead to violence.

~~~
perl4ever
I'm not particularly a fan of Musk, but the purported objective of SEC
enforcement is to protect investors. If (as I read a day or two ago) the stock
plunged on news of enforcement, then it's reasonable to question whether
punishing him makes sense. Are the stockholders really better off with less
(or no) Musk? Maybe, but does the SEC know better than the market? In any
case, I'm not sure how or if "equal justice" is relevant.

~~~
ryan_j_naughton
The SEC isn't there to simply "protect investors". Your implication is the
investors worth protecting are those with long positions. What about the
shorts?

The SEC are there to protect the integrity of the market. Things like
fraudulent information, insider trading, etc are corrosive to the mechanisms
which a well functioning market requires.

~~~
perl4ever
"Your implication is the investors worth protecting are those with long
positions"

Maybe there should be a bias towards those who benefit from the continuing
viability of the company and maybe not.

But in this case, I suggest it's moot just because the damage to longs
appeared to be significantly greater than the damage to shorts and it doesn't
counterbalance anyway.

The penalties seem arbitrary to me. Transferring several million (or billion)
dollars around as they are doing doesn't seem to rectify in any way the
purported injustice to shorts. The whole episode drove down the stock quite a
bit, so longs have suffered a lot, shorts have suffered somewhat, and the
government collected a commission. Nobody has had wrongs rectified, and it's
unknown whether prying Musk away from Tesla is a net gain.

Personally, I was neither long nor short TSLA at the time of the tweet, and I
don't think short sellers are inherently illegitimate. However, I think the
existence of a public company generally serves a social purpose and long
investors are not quite symmetric with short investors. If, in general, there
is a dispute where you can apply long investors' concept of fairness, or you
can apply short investors' concept of fairness, it kind of makes sense that
what damages the company less is probably the right answer, barring something
like Theranos that shouldn't exist at all.

------
cipherzero
> The SEC also today charged Tesla with failing to have required disclosure
> controls and procedures relating to Musk’s tweets

It’s almost like the current administration should also have these!

~~~
SlowRobotAhead
A. The presidency isn’t a publicly traded company.

B. Obvious joke about “but it’s for sale like it is” :)

C. Anyone still arguing about Trump Tweets is being obtuse the bias in media.
He found a loophole to get his message out, I don’t agree with the content
usually but can’t fault him for the workaround.

~~~
daveFNbuck
He didn't find a loophole to get his message out. He's the President of the
United States. He can call a press conference and everyone will report on his
message across the country. There's no need for a loophole. The complaint is
that he's communicating irresponsibly in a way that needlessly hurts others.

~~~
Amezarak
Since at least the early 2000s, and certainly throughout the Bush and Obama
administrations, the media has felt perfectly free to basically ignore any
Presidential press conference they didn't think was interesting. You were
doing good if the media passed on a few soundbites or put a story about it (in
their words, with their framing) on the front page.

Twitter, for better or worse, gives you direct access to normal people. I'm no
fan of Musk, but I'm inclined to believe that if our financial (and in the
example, political) system is so fragile that tweets can blow it all to hell,
we have a serious problem and system collapse is inevitable.

~~~
daveFNbuck
No one is complaining about the tweets that aren't interesting. Obama tweeted
too.

------
vs2
Ouch 20million for a drunken tweet

~~~
rabidrat
Elon is worth $20b [1]. $20m is 0.1% of his net worth. That's like a $1000
fine for someone who has "only" $1m. I have quite a bit less than $1m and a
$1000 fine, while not nothing, would make me cranky for a week or a two but
have almost no material impact on my life.

~~~
threeseed
You can’t make these statements. Net worth is not the same as liquid assets.

Most of his net worth is likely tied up in stock. Which he can’t exactly sell.

~~~
afterburner
He can take out a loan. It's easy, he has all those stocks to leverage
against.

~~~
adtac
What interest rates do rich people like him get? Is the concept of charging
interest still valid at that level or is it all bartering of favours?

~~~
tomatocracy
I couldn't tell you what interest rate he's likely to pay but in general in
this situation, there is interest. Whoever lends him the money has their own
cost of funds and admin costs to cover at a minimum, even if they view
repayment as close to zero risk because the collateral is very good.

------
chx
Richard S. Fuld Jr. and Lloyd Blankfein played significant part of causing US
households to lose 14 trillion dollars. There were zero consequences. Musk
caused a blip in the value of a tiny 45B market cap company and is crucified
for it. Smthng.

~~~
compcoffee
> _There were zero consequences._

Excuse me? Fuld was canned and his equity was wiped out. In what way was Musk
"crucified"? Seems to me he got off easy.

~~~
bdcravens
The use of the word "crucified" probably speaks volumes about how some see
Musk.

------
matz1
Damn, Sweet 40mil extortion by SEC

~~~
dang
Could you please stop posting unsubstantive comments to Hacker News?

------
ChristianBundy
EDIT: Nevermind, just saw that he'll remain CEO.

------
musketX
The only reason why they attacked him is this twitt : "Who do you think _owns_
the press? Hello." Even a billionaire can't say that without retaliation.

------
late2part
Elon games the system. Puts his brother in the cosmetic role of board
chairman, pays $2500 (in regular folk equivalence) and appoints two faux
independent directors.

light slap on the wrist, a gentle speedbump, back to same.

Basically a speeding ticket.

~~~
mindcrime
_Basically a speeding ticket._

Which is really all that was needed anyway. The whole idea of forcing him out
as CEO, issuing a ban on being a CEO/Director of a public company, etc., was
pure over-reach from the beginning.

------
dayaz36
This is infuriating. Now if the SEC can go after the bankers that destroyed
the world economy that would be great... Seriously this doesn't make any
sense. The SEC was definitely conspiring to take power away from Elon..this
was their only goal

------
pfarnsworth
He's lucky. If he were a small time person he would be in jail by now. SEC
only goes after low hanging fruit, so you know that this was an easy case for
them. Musk deserves it for his stupidity but SEC isn't any protector of the
masses by any means.

------
zamalek
I'm not disputing the SEC decision about Musk, but why is his once-off and
inadvertent market manipulation more illegal than their consistent and
deliberate manipulation? Wrap Elon over the knuckles, sure, but what happens
to do people with that as their job description?

------
matchagaucho
Following Tesla is like watching a train wreck in slow motion.

The next few steps are painfully obvious. I hate to watch.

The board can now officially outvote Elon, so the first bond that defaults
will result in Tesla getting sold to BMW or Mercedes (or ?). I predict this
will happen within 24 months.

And no.... I don't hold a short position. I actually do want the home team to
win.

~~~
aerovistae
lmfao

------
thewizardofaus
If anyone wants to profit off this - buy TSLA calls!!! 290 strike price.

~~~
thewizardofaus
48 hours later , $310 share price. Thanks for the downvotes, just made a quick
$10K.

------
mmaunder
The most expensive joint in history. Literally one tweet while (I'm guessing)
he was baked cost $40MM, his chairmanship and two new board seats.

From the SEC complaint: "...he rounded the price up to $420 because he had
recently learned about the number’s significance in marijuana culture and
thought his girlfriend “would find it funny"..."

The two of them were probably giggling their asses off as he posted it.

~~~
throwaway9980
0% chance he recently learned about the significance of 420. Maybe he did use
this number because of it, but the assertion that he was high and that this
happened because he was high is just speculative.

~~~
mmaunder
Yup, that's what I said. Guessing.

------
thinkcontext
Stepping down as chairman is much less of a punishment than stepping down as
CEO. Looks like the SEC blinked.

~~~
thinkcontext
To those downvoting, he didn't accept the previous deal, presumably this one
is more to his liking. What other explanation is there besides the SEC giving
ground?

~~~
bjl
This deal is strictly worse than the one he refused. Fines doubled from 10M to
20M, chairman ban increased from two years to three, new communication review
process (not in the original deal), and they still have to install two new
board members.

~~~
thinkcontext
Are you joking? A 10m fine vs 20m is totally immaterial to a billionaire. 3
years is longer than 2 but it's clear giving up CEO was unacceptable to him.

~~~
bjl
You speculated that this deal was more to his liking than the previous one. I
was just pointing out how absurd that statement was given that this deal is
worse than the other one in every respect.

~~~
FartyMcFarter
> this deal is worse than the other one in every respect.

Is it? I thought the other settlement included Musk not being able to lead
companies for two years:

[https://www.marketwatch.com/story/elon-musk-rolling-the-
dice...](https://www.marketwatch.com/story/elon-musk-rolling-the-dice-and-
buying-time-by-turning-down-sec-settlement-2018-09-28)

~~~
kentm
According to [https://www.nytimes.com/2018/09/28/business/elon-musk-
tesla-...](https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec-
deal.html) the original terms were

 _The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as
chairman of Tesla within 45 days and not resume that post for two years. The
company, also a party to the proposed agreement, would add two new directors
to its board. Mr. Musk and the company would pay tens of millions of dollars
in fines, according to the people, who requested anonymity because they were
not authorized to speak publicly._

In other words, it’s the exact same deal presented before with some of the
penalties increased. There’s no other way to explain it than Musk rejected the
real and then realized he messed up when the SEC started with the lawsuit.

------
throwawaydream1
It’s unfortunate that so many comments below are so stuck on how egoistic Elon
is. As if they themselves are ego-less. I work in a 4000 people company with
great culture. But even then egos are only skin deep and easily surfaced.
Humans are not machines. Egos and emotions are the norm. Just look at
yourself.

------
Ice_cream_suit
This settlement will massively strengthen the civil litigation brought against
Musk, by several of the many investors he hurt with his tweet.

See for instance : [https://www.cnbc.com/2018/09/06/short-seller-andrew-left-
fil...](https://www.cnbc.com/2018/09/06/short-seller-andrew-left-files-class-
action-lawsuit-against-tesla-and-elon-musk.html)

The Musk death spiral continues...

~~~
GW150914
Their cases were already incredibly strong, given the nature of the tweet and
his Twitter account’s status as an official corporate mouthpiece for five
years. From a purely legal perspective the no contest nature of this
settlement doesn’t do much to weaken or strengthen their case, but It also
doesn’t matter because their cases are already ridiculously strong. Musk is
still in trouble, but a death spiral is too strong a word (unless the DOJ
brings charges), he could still pull up. If he backs off the Twitter and keeps
his head down, he’ll recover.

Tesla though, is in a real death spiral with their debt.

[https://www.investopedia.com/terms/d/deathspiral.asp](https://www.investopedia.com/terms/d/deathspiral.asp)

That’s going to be muuuuuch harder to correct, given that they’re going to
have sell a load of discounted stock just to keep afloat in 2019.

------
liftbigweights
This is going to burn a lot of shorts come monday.

If you guys want a good chuckle at how wrong so many on HN were two days ago.

[https://news.ycombinator.com/item?id=18088099](https://news.ycombinator.com/item?id=18088099)

When it comes to musk and even facebook/google/etc, there is a toxic mix of
journalists' hate and a targeted campaign by other groups ( I don't know
whether it is short sellers or whatever ). It's ridiculous the amount of
absurd hate musk got for a simple tweet. Some even claimed he might go to jail
for it.

~~~
refurb
I’d say most HN comments were right on.

When it first happened many on HN said “it’s not a big deal”, “the SEC won’t
care”, “they can’t prove anything” and “they won’t ask him to step down as
chairman”.

And yet here we are.

~~~
liftbigweights
> I’d say most HN comments were right on.

What were they right about?

> When it first happened many on HN said “it’s not a big deal”, “the SEC won’t
> care”,

But you just said most HN comments were right?

> “they can’t prove anything” and “they won’t ask him to step down as
> chairman”.

Can you show me one comment that even talked about chairman?

> And yet here we are.

Yes here we are. Nothings changed. Musk/TSLA got a tiny fine. Gave up his
chairman which doesn't really matter since he is the largest shareholder.

Right now shorts are burning. Hopefully you aren't one.

------
apapli
“The proceeds will be distributed to harmed investors”.

Tesla is a speculative investment, and it is largely one of backing Musk, an
unpredictable but seemingly brilliant engineer come businessman.

I’d much rather see the $40m distributed to people who really need the money,
ie the homeless etc.

I’d imagine $30m of this $40m will go straight back to investment banks.
Hardly a group who “need” the money.

Edit: downvoted, wtf?

~~~
generalpf
In what way is he a brilliant engineer? He’s not designing the cars and the
rockets. He helped make PayPal over 20 years ago.

~~~
rst
Musk doesn't solve the design problems, but (a la Jobs), he does tell the
"real engineers" what problems to solve.

Here's an interview with Tom Mueller, the SpaceX lead propulsion engineer
since inception, about (among other things) working with Elon. Note
particularly the discussion of "face shutoff", which is an approach to
sequencing engine startup which Musk insisted on over Mueller's initial
objections, because Mueller thought it would be too hard to make it work in an
engine the size of the Merlin. They ultimately did, after blowing up a lot of
test hardware. The result was a simpler, lighter, more reliable engine --
which they wouldn't have had if Musk hadn't insisted they try, over Mueller's
objections.

[https://zlsadesign.com/post/tom-mueller-
interview-2017-05-02...](https://zlsadesign.com/post/tom-mueller-
interview-2017-05-02-transcription/)

------
LexBrosner
Raise your hand if you've read Atlas Shrugged. Now, raise your hand if you're
read in on administrative law (i.e. Basically, any of the 200+ Fed agencies
can make up rules, at will. I know, it's obsured). Well, Administrative Laws
(made up rules) are enforced as black letter "law," including asset forfeiture
and imprisonment (Worse, 70+ Fed agencies are armed and many have SWAT Teams).

It saddens me to see how many of you assume, apparently w/o question, that
buerocrates at the SEC could and should, at will, use their made up rules to
excommunicate or jail the founder and leader of a ground breaking companies.

You say "but, justice is blind." However, enforcement is targeted. Plus, the
people I know believe in Elon (No, we're not on a first name basis, the name
"Elon" is iconic and doesn't require a last name.) and not Tesla as a company.
Without the key innovators and producers, most tech companies would be
worthless.

Now, wouldn't it be delightful to watch Elon sell his stake and exit Tesla
entirely, just to prove a point? Surely, in a short period of time, even w/
their new golden boy CEO, Tesla would fold; ala Apple Computer, Inc. W/o Steve
Jobs. All the short positions could finally win (yea!). After which, Elon
could buy back Tesla and take it private. With acts like Sarbanes Oxley and
Dodd-Frank, who would want to run a public company?

If you disagree, go found and operate a few successful businesses. Report back
in a decade.

