The battle between Elon Musk and the Securities and Exchange Commission took another dramatic twist on Thursday after reports surfaced of the federal agency investigating the Tesla CEO and his brother, Kimbal Musk, of alleged insider trading.
According to a report by the Wall Street Journal, the issue stems from the Musk brothers selling Tesla stocks last year, with the SEC examining whether they breached insider trading rules. Kimbal Musk sold Tesla shares amounting to $108 million last November 5, one day before his brother Elon asked users of social media platform Twitter whether he should sell 10 percent of his stake in Tesla.
The Tesla CEO later sold over 2 million shares. The company's shares dropped in value after Musk posted the poll on Twitter. The regulatory agency reportedly questioned whether Kimbal Musk had prior knowledge of Elon Musk's upcoming Twitter poll when he sold his shares then. Kimbal Musk also allegedly sold $25 million worth of Tesla shares at $852 per share in February 2021, the highest price until October of that year.
The disclosures for the share sales of Kimbal Musk did not say that he used a 10b5-1 plan to sell the Tesla stock. Rule 10b5-1 under the Securities Exchange Act of 1934 states that major shareholders of a company are allowed to sell a predetermined number of their shares at a predetermined time to avoid accusations of insider trading.
The SEC declined to comment regarding this reported insider trading investigation. Tesla could not field requests for comment as the company does not operate a public relations department. Elon Musk told reporters on Thursday that his brother had "no idea" he would do a Twitter poll about selling Tesla shares.
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Musk did not mince any words when a Twitter user suggested that he has been accumulating evidence on the SEC for their alleged SEC corruption, saying, "Building a case is exactly what I've been doing." Musk added that he did not start the fight, but he will definitely finish it.
Musk grabbed the headlines earlier this month when he accused the SEC of conducting a "harassment campaign" against him and Tesla over their 2018 settlement. Musk's lawyer alleged in a letter to District Judge Alison Nathan that the SEC targets the Tesla CEO with "unrelenting" investigations and chills his exercise of First Amendment rights.
Musk crafted the letter after Tesla disclosed that the SEC had issued another subpoena to the carmaker in November 2021, with the federal agency looking to find information on the company's compliance with the settlement. The settlement between the parties included Musk and Tesla, each paying $20 million to the SEC after issuing false and misleading statements to his investors on Twitter.
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