The Securities and Exchange Commission (SEC) is suing Tesla CEO Elon Musk according to a Manhattan court docket.
The suit alleges that Musk committed securities fraud. Shares of Tesla immediately dipped by roughly 4 percent after the news.
The SEC is seeking to remove Musk from Tesla and ban him from being an officer of a publicly traded company. The commission is also suing Musk to pay civil penalties for the alleged fraud and to forfeit any profit made from the actions stated in their charges.
Musk is one of the highest profile executives the agency has pursued fraud charges against.
The SEC along with the Department of Justice was investigating the company after Musk tweeted earlier in the year that he had secured funding to take Tesla private at $420 a share.
“Am considering taking Tesla private at $420. Funding secured.” Musk tweeted in August.
The SEC concluded in its investigation that “[t]his statement was false and misleading.”
The agency also charged that three other Musk statements that day about the company potentially going private were also misleading.
“Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions,” the SEC wrote in its complaint.
“When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a 'special purpose fund,' and had not confirmed support of Tesla's investors for a potential going-private transaction,” it continued.
After the initial tweet, Musk claimed to The New York Times that it was an attempt at transparency. He said he landed on the number 420 not to make a weed joke as some speculated, but because he intended to offer $419 a share, a roughly 20 percent premium over the stocks then price.
He decided to round up a dollar telling The New York Times that the price per share was “better karma at $420 than at $419.”
“But I was not on weed, to be clear,” he added.
He later smoked weed during a September interview with podcast host, Joe Rogan, which sent Tesla's share prices into a temporary spiral.