A federal judge on Wednesday denied Tesla CEO Elon Musk’s request to terminate an agreement he entered with the SEC in 2018 requiring him to run certain Twitter posts by securities lawyers for pre-approval.
The judge also denied Musk’s motion to quash a new subpoena by the SEC. The decision came as Musk was in the process of acquiring Twitter for $44 billion.
The 2018 agreement was part of a $40 million settlement over charges that Musk misled investors by falsely tweeting that he had secured funding to take Tesla private. Musk relinquished his role as chair of Tesla’s board as part of it.
The SEC in November served Musk with a subpoena after he tweeted about potentially selling a large portion of his holdings in Tesla without obtaining pre-approval. Musk, who routinely publicly disdains the SEC, in February accused the agency of a harassment campaign aimed at chilling his right to free speech and moved to seek an end to the agreement.
“With regard to the First Amendment argument, it is undisputed in this case that Musk’s tweets are at least presumptively ‘protected speech,’” U.S. District Judge Lewis Liman wrote in his opinion denying the motion Wednesday. “At the same time, however, even Musk concedes that his free speech rights do not permit him to engage in speech that is or could ‘be considered fraudulent or otherwise violative of the securities laws.’”
Liman noted that parties can waive First Amendment rights in consent decrees as the one Musk has with the SEC.
“Musk’s argument that the SEC has used the consent decree to harass him and to launch investigations of his speech is likewise meritless and, in this case, particularly ironic,” Liman wrote. “The Supreme Court has instructed that ‘modification should not be granted where a party relies upon events that actually were anticipated at the time it entered into a decree.’”
Musk should have anticipated that he would be subject to further SEC investigations, Liman said.
In response to the decision, Musk lawyer Alex Spiro said "stay tuned."
“Nothing will ever change the truth, which is that Elon Musk was considering taking Tesla private and could have," Spiro said. "All that's left some half-decade later is remnant litigation which will continue to make that truth clearer and clearer."
