Tesla's Elon Musk in hot water again

A US Federal Court Judge has given embattled Tesla boss Elon Musk until March 11 to prove why he should not be held in contempt of court.

The Tesla CEO faces seeing his fraud settlement with the United States Securities and Exchange Commission (SEC) unraveling and Musk could be sent to prison if contempt of court charges are upheld.

The SEC, which accepted Musk’s US$20 million cheque to settle fraud charges last October, has accused Musk of again manipulating the share market via inaccurate Twitter statements.

All of Musk’s tweets were supposed to be vetted by the SEC prior to posting, as part of his settlement for his “funding secured” tweets about taking Tesla private at US$420 a share, but that hasn’t been happening.

The SEC filed its contempt of court complaint in the Manhattan Federal Court on Monday, claiming the Tesla leader’s more recent February 19 tweet about production volumes had not been presented for vetting by the SEC and could have affected Tesla’s share price.

“Tesla made 0 cars in 2011, but will make around 500k in 2019,” Musk tweeted to more than 24 million followers, and the SEC noted that the tweet was also factually incorrect.

Musk took four hours to correct the tweet, insisting he meant the “annualized production rate” at the end of 2019 would be 500,000 a year, though he expected deliveries of about 400,000.

“Musk has thus violated the court’s final judgment by engaging in the very conduct that the preapproval provision of the final judgment was designed to prevent,” the SEC’s motion said.

News that the SEC was prosecuting Musk saw Tesla’s share price drop five per cent overnight, but worse could follow for the former Chairman.

While US law could see the SEC chase another cash settlement, it could legally seek to reopen Musk’s original fraud settlement, even reinstating the original fraud charges.

The easiest way out for Musk would be if the SEC sought another monetary fine, but the worst case could send the South African to jail for both the original fraud charge and this week’s contempt of court proceedings.

One option open to the SEC and the Federal Court would be to bar Musk from Tesla’s board.

After being forced to surrender his Chairman title as part of his fraud settlement from the infamous “funding secured” tweet where he promised to take Tesla private, Musk has been accused of taunting the SEC.

He has lambasted the government organisation, tasked with keeping the stock exchange’s players in line, by calling it the “Shortseller Enrichment Commission” on Twitter – after his settlement for fraud.

He went on 60 Minutes in the US in December to insist that he hadn’t allowed the SEC to censor any of his tweets.

“I want to be clear. I do not have respect for the SEC,” he said.

Even after the Tweet that finally prompted the SEC into action against Musk, the billionaire doubled down against them.

“SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing …” he tweeted, referring to January comments to industry analysts that the company would build between 350,000 and 500,000 units of the Tesla Model 3 this year.

In responding to the SEC’s investigations into Musk's latest troublesome tweet, a Tesla lawyer insisted the tweet tried to explain pre-existing information from its fourth-quarter earnings call and didn’t need vetting.

While Musk was fined US$20 million personally for the “funding secured” market-manipulation fraud, cash-strapped Tesla also received a fine of another US$20 million.