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Judge permits SEC to respond to Elon Musk's refutal of contempt claim


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Judge permits SEC to respond to Elon Musk's refutal of contempt claim

A federal judge granted the Securities and Exchange Commission permission to respond by March 19 to Tesla Inc. CEO Elon Musk's claim that he should not be held in contempt.

On March 11, Musk refuted the SEC's claim that his Feb. 19 tweet about Tesla's production numbers violated an agreement between the two parties. The SEC had asked the U.S. District Court Southern District of New York to hold Musk in civil contempt.

Federal Judge Alison Nathan wrote in the March 12 court documents that the SEC and Musk have until March 26 to decide on an evidentiary hearing.

Earlier on March 12, the SEC filed with the court requesting permission to file a reply memorandum up to 15 pages long no later than March 19 "to respond to new factual assertions and legal arguments raised" by Musk.

In Musk's filing refuting the claim, the CEO and his legal team said Tesla's disclosure counsel reviewed the executive's tweet shortly after it was posted. The counsel decided that the company did not view the tweet as shareholder material and that it did not require preapproval.

In the tweet, Musk wrote, "Tesla made 0 cars in 2011, but will make around 500k in 2019." Musk later wrote, "Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k."

The SEC said the statement was inaccurate and disseminated to over 24 million people.

Musk's lawyers said the tweet "did not cause any notable move in Tesla's stock price in the after-hours market and was plainly not material to shareholders."

They also noted that following the settlement with the SEC, Musk "diligently attempted" to comply with the settlement orders "in a reasonable manner." Musk's lawyers said the executive has "significantly altered" his communication, especially on Twitter, in a bid to adhere with the agreement.

The SEC took Elon Musk to court in 2018 over tweets in which he allegedly misled investors by announcing that he will take Tesla private. Consequently, the SEC reached settlement agreements with Musk and Tesla, costing Musk and Tesla a combined $40 million in penalties, Musk's chairmanship and the appointment of two new independent directors.