/ Elon Musk in Adelaide, Australia in 2017. Share this story
Elon Musk‘s that he had “funding secured” to take Tesla private has become the subject of a criminal investigation by the Justice Department, , citing two anonymous sources. The involvement of the Justice Department would be significant because the Securities and Exchange Commission—which has been for several weeks—only has the power to bring civil charges.
Tesla‘s share price dropped by about 6 percent in the minutes after Bloomberg reported the news.
While Musk‘s initial tweet claimed he had “funding secured” to buy out existing shareholders, he soon admitted he didn‘t actually have anything in writing. Days before the tweet, he had a and emerged from the meeting convinced that the Saudis would be willing to fund a deal.
“That‘s not what anyone in the financial markets thinks of when you say ‘funding secured,‘” , an expert on securities law at Santa Clara University, in an interview with Ars last month.
A backlash from shareholders forced Musk to less than three weeks after his initial tweet. But that didn‘t put an end to possible legal complications. Tesla shareholders had a number of lawsuits against Tesla, claiming that false statements by Musk had caused them to pay inflated prices for Tesla shares. And the Securities and Exchange Commission was already .
Now, it appears that the Justice Department is looking into the case as well. In an interview with Ars Technica last month, securities law expert William Sjostrom said it wasn‘t common for the Securities and Exchange Commission to refer cases to the Justice Department for possible criminal charges.
Of course, it‘s also not common for the CEO of a publicly traded company to tweet out this kind of news without first having it vetted by securities lawyers.
Update: “Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it,” Tesla wrote in an email to Ars Technica. “We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.”