Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Taking Legal Action Against the SEC

LargeHamCollider

Battery cells != scalable
Jan 10, 2015
981
1,877
United States
The SEC exists to protect shareholders and ensure fair markets. Instead of protecting shareholders, however, they have become a risk-factor for retail investors that needs to be planned for and mitigated. This state of affairs constitutes gross negligence on the part of the SEC.

This post is not about Elon Musk’s tweets or tweeting habits, and does not rule on whether or not his tweets were appropriate, this is about whether the SEC’s response was appropriate.

Consider the following facts regarding the “420, funding secured” incident:

(1)In the “420” tweet incident the SEC’s actions moved the stock far more than Elon’s tweet, I personally suffered significant financial loss as a direct result of the SEC’s actions.
(2) Elon’s accepted punishment for the “420” incident was more severe than that of Elizabeth Holmes, the biggest fraud of the last decade. Elon accepted this punishment only because the SEC was holding his shareholders hostage, causing enormous pressure on him to cave to the SEC from his shareholders (myself included).
(3) The SEC is aware of their ability to move markets by their actions, and is aware of other options to correct or restrain Elon’s twitter habits.

Consider the following facts regarding the “500k production” incident:
(1) In the “500k” tweet incident the SEC’s actions moved the stock far more than Elon’s tweet.
(2) The tweet was not sent during market hours and had no significant or lasting effect on AH prices. No new information was divulged.
(3) The SEC is aware of the effect their actions would have on the value of the stock.

This situation is made all the more eye-brow raising by the lack of public consequences for the numerous very suspicious options plays that appear to front-run material events such as the Moody’s downgrade last year or the CR Model 3 recommendation withdrawal. Most damning is that the SEC’s own announcements have been front-run in significant fashion, suggesting SEC collusion with short sellers. For example, 17,294 put options with a 3 week expiry that were $200 OTM were purchased shortly before the SEC announcement regarding the “420” incident. That is a very unusual volume of OTM puts unless someone is expecting a sharp move in a narrow window. These actions occur *in the context of* known conflicts of interest by certain members of the SEC, such as Steven Peikin, Co-Director of the SECs division of enforcement who was managing partner at Sullivan & Cromwell LLP’s Criminal Defense and Investigation Group where he spent significant time working for British Petroleum and rival auto manufacturers. Additionally, SEC chair John Clayton previously did work for rival auto manufacturer Volkswagen.

Given the above it is hard not to conclude that one or more of the following 4 options is the case:

(1) The SEC is motivated by a personal animus against Musk.
(2) The SEC is no longer interested in protecting investors and ensuring fair markets.
(3) SEC personnel have a financial, personal or political interest in Tesla failing.
(4) The SEC is not aware of their effects on the market, this would be tough to believe and would constitute negligence.

Also conspicuously absent is any SEC action against short-sellers, some of whom have been tweeting defamatory information every 15 minutes (no exaggeration) for multiple years in an attempt to affect the stock and consumer sentiment. Some of these same shorts have been known to receive insider information prior to material events, see here:
Diego on Twitter

Given that shareholders of Tesla have unfairly suffered loss due to SEC actions I would like of explore the idea of legal action against the SEC to prevent further abuses of power. I am not a lawyer but I know we have lawyers in this group and would like to hear their opinions.
 

larmor

Active Member
Oct 27, 2014
2,275
6,119
Westlake, TX
The SEC exists to protect shareholders and ensure fair markets. Instead of protecting shareholders, however, they have become a risk-factor for retail investors that needs to be planned for and mitigated. This state of affairs constitutes gross negligence on the part of the SEC.

This post is not about Elon Musk’s tweets or tweeting habits, and does not rule on whether or not his tweets were appropriate, this is about whether the SEC’s response was appropriate.

Consider the following facts regarding the “420, funding secured” incident:

(1)In the “420” tweet incident the SEC’s actions moved the stock far more than Elon’s tweet, I personally suffered significant financial loss as a direct result of the SEC’s actions.
(2) Elon’s accepted punishment for the “420” incident was more severe than that of Elizabeth Holmes, the biggest fraud of the last decade. Elon accepted this punishment only because the SEC was holding his shareholders hostage, causing enormous pressure on him to cave to the SEC from his shareholders (myself included).
(3) The SEC is aware of their ability to move markets by their actions, and is aware of other options to correct or restrain Elon’s twitter habits.

Consider the following facts regarding the “500k production” incident:
(1) In the “500k” tweet incident the SEC’s actions moved the stock far more than Elon’s tweet.
(2) The tweet was not sent during market hours and had no significant or lasting effect on AH prices. No new information was divulged.
(3) The SEC is aware of the effect their actions would have on the value of the stock.

This situation is made all the more eye-brow raising by the lack of public consequences for the numerous very suspicious options plays that appear to front-run material events such as the Moody’s downgrade last year or the CR Model 3 recommendation withdrawal. Most damning is that the SEC’s own announcements have been front-run in significant fashion, suggesting SEC collusion with short sellers. For example, 17,294 put options with a 3 week expiry that were $200 OTM were purchased shortly before the SEC announcement regarding the “420” incident. That is a very unusual volume of OTM puts unless someone is expecting a sharp move in a narrow window. These actions occur *in the context of* known conflicts of interest by certain members of the SEC, such as Steven Peikin, Co-Director of the SECs division of enforcement who was managing partner at Sullivan & Cromwell LLP’s Criminal Defense and Investigation Group where he spent significant time working for British Petroleum and rival auto manufacturers. Additionally, SEC chair John Clayton previously did work for rival auto manufacturer Volkswagen.

Given the above it is hard not to conclude that one or more of the following 4 options is the case:

(1) The SEC is motivated by a personal animus against Musk.
(2) The SEC is no longer interested in protecting investors and ensuring fair markets.
(3) SEC personnel have a financial, personal or political interest in Tesla failing.
(4) The SEC is not aware of their effects on the market, this would be tough to believe and would constitute negligence.

Also conspicuously absent is any SEC action against short-sellers, some of whom have been tweeting defamatory information every 15 minutes (no exaggeration) for multiple years in an attempt to affect the stock and consumer sentiment. Some of these same shorts have been known to receive insider information prior to material events, see here:
Diego on Twitter

Given that shareholders of Tesla have unfairly suffered loss due to SEC actions I would like of explore the idea of legal action against the SEC to prevent further abuses of power. I am not a lawyer but I know we have lawyers in this group and would like to hear their opinions.
Sound great. Spreading fake information does not a company make, i wonder why the SEC allows such companies to have a business model on fake news.
 

OPRCE

Member
Jun 16, 2018
861
998
Bern, CH
Also conspicuously absent is any SEC action against short-sellers, some of whom have been tweeting defamatory information every 15 minutes (no exaggeration) for multiple years in an attempt to affect the stock and consumer sentiment.

It is Tesla/Musk's business to pursue their own legal remedy for defamation, if bothered.

Not sure the SEC has ever pulled up shorts for a conspiracy to defraud by dint of their orchestrated lies depressing the stock price, but suppose there has to be a first time for everything. However, would suggest Musk has all the makings of a bad test case, having regularly shat his copybook along the way.
 

OPRCE

Member
Jun 16, 2018
861
998
Bern, CH
Finally, some good news!

But also this:
Screen Shot 2019-02-27 at 12.56.50.png


Or, as Bjørn would say, "Aw shieeeet!"
 
Last edited:
  • Disagree
Reactions: WarpedOne

LargeHamCollider

Battery cells != scalable
Jan 10, 2015
981
1,877
United States
It is Tesla/Musk's business to pursue their own legal remedy for defamation, if bothered.

Not sure the SEC has ever pulled up shorts for a conspiracy to defraud by dint of their orchestrated lies depressing the stock price, but suppose there has to be a first time for everything. However, would suggest Musk has all the makings of a bad test case, having regularly shat his copybook along the way.
Does anyone else find this unusual? Do shorts have some sort of unspoken immunity?
 
  • Like
Reactions: WarpedOne

OPRCE

Member
Jun 16, 2018
861
998
Bern, CH
Definitely interested in hearing if shareholders have a case here.

My feeling is that they do have a case, but, as outlined above by @LargeHamCollider, it is an unwinnable one.

For reasons:

1. Jumping to the unfounded conclusion that SEC is motivated by personal animus against Musk and/or are participants in some grand criminal conspiracy to relatively advantage his competitor OEMs, etc., is somewhat akin to the argument that the IRS was merely biased against Al Capone due to his dress-sense or actually only wished to muscle in on his moonshine racket. Even if true, he made a unsympathetic subject upon whose case to test the thesis. Hard-case makes bad law.

2. Claiming that the damage to shareholders was caused by SEC enforcing the letter of the law as opposed to Tesla's CEO posting demonstrably fraudulent info re. a radical shift in the company's future on Twitter whilst ripped to the tits on Ambien et al is a ludicrous juxtaposition of legal cause and effect. No serious lawyer would put that before a court based on the evidence in this case.

3. The major risk-factor for which Tesla retail investors (via BoD) need a mitigation plan is self-evidently the gross negligence or at least amazing recklessness of the current CEO. Had they properly done their job during any one of his prior screams for relief (e.g. the #Pedogate saga), by banishing him to Christmas Island for a 6-months incommunicado rest-cure, there never would have been any bother with SEC at all. Their serial failure to impose discipline at multiple opportune moments forced SEC to eventually administer what was in effect a fairly gentle slap on the wrist.

4. Apparently unappreciative of the chance they were given both the company and Musk have prima facia failed to adhere to their court-enforced agreements with SEC, and are about to be sternly reminded that this matters to others with the power to inflict punishment until they finally internalise the lesson it also matters to them. Respectful signs of contrition would go over much better in this situation than appearing to have the fanboi-army launching speculative counter-suits.

5. Who or how said frivolous fishing expedition to buttress an unreasonable persecution complex, likely to become extremely expensive, is to be financed has not been explained. Musk presumably can afford professional legal advice and is a major shareholder (hence has standing), yet we do not see him leaping to advance this case.

6. Defamation complaint already dealt with above.
 

Yuri_G

Member
Nov 8, 2012
799
2,893
Raleigh, NC
My feeling is that they do have a case, but, as outlined above by @LargeHamCollider, it is an unwinnable one.

For reasons:

1. Jumping to the unfounded conclusion that SEC is motivated by personal animus against Musk and/or are participants in some grand criminal conspiracy to relatively advantage his competitor OEMs, etc., is somewhat akin to the argument that the IRS was merely biased against Al Capone due to his dress-sense or actually only wished to muscle in on his moonshine racket. Even if true, he made a unsympathetic subject upon whose case to test the thesis. Hard-case makes bad law.

2. Claiming that the damage to shareholders was caused by SEC enforcing the letter of the law as opposed to Tesla's CEO posting demonstrably fraudulent info re. a radical shift in the company's future on Twitter whilst ripped to the tits on Ambien et al is a ludicrous juxtaposition of legal cause and effect. No serious lawyer would put that before a court based on the evidence in this case.

3. The major risk-factor for which Tesla retail investors (via BoD) need a mitigation plan is self-evidently the gross negligence or at least amazing recklessness of the current CEO. Had they properly done their job during any one of his prior screams for relief (e.g. the #Pedogate saga), by banishing him to Christmas Island for a 6-months incommunicado rest-cure, there never would have been any bother with SEC at all. Their serial failure to impose discipline at multiple opportune moments forced SEC to eventually administer what was in effect a fairly gentle slap on the wrist.

4. Apparently unappreciative of the chance they were given both the company and Musk have prima facia failed to adhere to their court-enforced agreements with SEC, and are about to be sternly reminded that this matters to others with the power to inflict punishment until they finally internalise the lesson it also matters to them. Respectful signs of contrition would go over much better in this situation than appearing to have the fanboi-army launching speculative counter-suits.

5. Who or how said frivolous fishing expedition to buttress an unreasonable persecution complex, likely to become extremely expensive, is to be financed has not been explained. Musk presumably can afford professional legal advice and is a major shareholder (hence has standing), yet we do not see him leaping to advance this case.

6. Defamation complaint already dealt with above.

Nice words you got there friend. We're talking about the SEC's call for a contempt of court charge against Musk, not the funding secured tweet or the cave diver tweet. If their call for contempt against Musk is struck down, I would think that shareholders would have more than a hope to recoup the money lost by the subsequent share price dip.
 
  • Like
Reactions: LargeHamCollider

OPRCE

Member
Jun 16, 2018
861
998
Bern, CH
Nice words you got there friend. We're talking about the SEC's call for a contempt of court charge against Musk, not the funding secured tweet or the cave diver tweet. If their call for contempt against Musk is struck down, I would think that shareholders would have more than a hope to recoup the money lost by the subsequent share price dip.

1. The same principle applies: it is not the enforcement action which causes irregular stock movements, rather it is simply a further unavoidable symptom of the breach by the culprit who is now being pulled up for it.

2. Please outline your legal thesis as to how this proposed suit has any hope of recovering damages from SEC? Any precedent?

3. IMHO this self-inflicted circus is a distraction from the more important mission of Tesla/Musk. He only has to show some appropriate contrition to the court, promise to and then actually strictly abide by his agreements, take a 6-month sabbatical at some remote health farm with yoga, gym and a sauna, then return to focus on his real job at a reduced workload.
 

neroden

Model S Owner and Frustrated Tesla Fan
Apr 25, 2011
14,676
63,885
Ithaca, NY, USA
Principle of suing a government agency in the US: you never sue the agency, you sue the individuals in the agency. There are two basic mechanisms:
(1) Sue them in their official capacity, for actions which qualify as official actions but which were not in compliance with the law (much more common)
(2) Sue them in ther personal capcity, over actions which never legally qualified as official actions or were done for corrupt personal motivations (less common)

If you're proposing a theory of conspiracy between certain SEC officials and options traders, you would name a bunch of John Does in the lawsuit and attempt to get discovery. It would be a long shot, but discovery has been allowed in cases like that on occasion...

In this case it would be a shareholder derivative lawsuit made on behalf of the shareholders. You can only file such a lawsuit if Tesla, Inc. decides not to file it -- so first you have to file a demand on Tesla's board asking that *they* file it. You'd have to have your ducks in a row with the case design before doing that, obviously.

----

I think perhaps a better move is to file an amicus brief with the court on behalf of a shareholder group stating that the undersigned shareholders consider the SEC's proposed contempt order to be detrimental to shareholders, detrimental to the proper operation of the markets, and factually incorrect as Musk's '500k' tweet was not material. The judge can take this into consideration. The brief can bring up other relevant points which the judge may not be aware of, such as the evidence of selective enforcement by the SEC.

Even if the judge *doesn't accept* the amicus brief, she or her clerks will have to read it. Which is what matters.
 
Last edited:

Products we're discussing on TMC...

About Us

Formed in 2006, Tesla Motors Club (TMC) was the first independent online Tesla community. Today it remains the largest and most dynamic community of Tesla enthusiasts. Learn more.

Do you value your experience at TMC? Consider becoming a Supporting Member of Tesla Motors Club. As a thank you for your contribution, you'll get nearly no ads in the Community and Groups sections. Additional perks are available depending on the level of contribution. Please visit the Account Upgrades page for more details.


SUPPORT TMC
Top