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Musk accuses SEC of illegally muzzling

Musk must get pre-approval before tweeting about Tesla, a requirement he called a “government-imposed muzzle.”

US securities regulators are illegally muzzling Tesla CEO Elon Musk and violating his freedom of speech by continually trying to enforce a 2018 securities fraud settlement, Musk’s lawyer argues in a lawsuit.

The document, filed late Tuesday in the Manhattan federal appeals court, was written in support of Musk’s appeal against a lower court’s decision in April to uphold the settlement with the Securities and Exchange Commission.

The letter said a provision in the settlement that requires Musk to get pre-approval before tweeting about the electric car company is an illegal “government-imposed muzzle on Mr. Musk’s speech before it is delivered.”

The settlement required his tweets to be approved by a Tesla attorney before they were published. The SEC is investigating whether Musk violated the settlement by asking Twitter followers last November to sell 10 percent of his Tesla stock.

But in the briefing, Musk’s attorney Alex Spiro claimed that the SEC is constantly investigating Musk for topics not covered by the settlement. It asked the Second Circuit Court of Appeals to discontinue or change the pre-approval provision

“The pre-approval provision in the consent decree qualifies as a prior restriction of speech that violates the First Amendment,” Spiro wrote. “It prohibits future lawful speech on a range of topics without approval.”

Furthermore, Musk’s speech has been cooled by the threat of SEC investigations and prosecution for contempt of court, the letter said.

The entire dispute stems from an October 2018 agreement with the SEC that Musk signed. He and Tesla agreed to pay $20 million in civil fines for Musk’s tweets about having the “financing” to take Tesla private at $420 a share.

Funding was far from locked in and the electric vehicle company remains public, but Tesla’s stock price has risen. The settlement specified board changes, including Musk’s removal as board chairman, as well as pre-approval of his tweets.

In April, U.S. District Judge Lewis Liman in New York rejected Musk’s offer to annul the settlement he signed with the SEC. He also denied a motion to overturn a subpoena from Musk seeking information about possible breaches of the settlement.

Limon’s ruling stated that Musk did the tweets without prior approval, but the judge later wrote that he had no intention of passing judgment on that matter.

The SEC declined to comment on Wednesday.

In the court statement, Spiro said Musk’s waiver of his First Amendment rights in the settlement was not voluntary because Musk had no way of knowing how far it went. “The provision applies to future statements about circumstances that no one could have foreseen in advance,” he wrote.

Musk, he said, is under constant threat that the SEC will disagree with his interpretation of what he can say. Musk also agreed to the deal when Tesla was a smaller company and the SEC action could have jeopardized its funding.

“The SEC has been constantly investigating Mr. Musk’s speech, using vague interpretations of the consent decree that are ostensibly designed to curb and cool his future speech, all in relation to speech that is totally unrelated to the tweet. of 2018 for which the SEC initiated this action,” Spiro wrote. .

Tesla is now the most valuable automaker in the world and Musk is the richest person in the world.

Liman ruled that Musk’s claim that he signed the settlement through economic coercion is “completely inconclusive.”

Even if Musk feared a lawsuit with the SEC would financially ruin Tesla, “it doesn’t provide a basis for him to get out of the verdict he voluntarily signed,” Liman wrote.

The judge also said Musk’s argument that the SEC had used the settlement order to harass Musk and launch investigations was “undeserved.”

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