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Short seller sues Tesla, Musk over alleged violation of federal securities laws

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Short seller sues Tesla, Musk over alleged violation of federal securities laws

Short seller Andrew Left of Citron Research has sued Tesla Inc. and CEO Elon Musk over alleged violations of federal securities laws.

Left filed a lawsuit seeking class-action certification in the U.S. District Court for the Northern District of California's San Francisco division on Sept. 6.

Among the allegations in the lawsuit, Left charged that Musk artificially manipulated Tesla's stock price by issuing materially false and misleading information.

The lawsuit cites Musk's Aug. 7 tweet, in which he expressed interest in taking Tesla private at $420 a share and said he had secured funding. Shares closed about 11% higher in heavy trading after his statements.

The CEO later abandoned his plans to take the company private in an Aug. 24 blog post, saying that the majority of shareholders wanted the company to remain public.

"Defendant Musk artificially manipulated the price of Tesla securities with objectively false tweets in order to 'burn' the company's short sellers," the lawsuit charged.

The lawsuit was filed on behalf of all persons who purchased or sold Tesla securities between Aug. 7 and Aug. 17.

Labaton Sucharow, one of the law firms representing Left, announced the lawsuit in a press release. "This appears to be a textbook case of fraud," Labaton Sucharow partner Michael Canty charged.

"We believe Musk attempted to manipulate the price of Tesla securities with false and misleading tweets, in a directed effort to harm short sellers," Canty added.

Tesla did not immediately respond to S&P Global Market Intelligence's request for comment.

Several lawsuits have been brought against Tesla since Musk's Aug. 7 tweet. Reuters reported Aug. 10 that some Tesla investors sued the company and Musk over his going-private tweets, alleging that they were false and misleading. The investors also claimed that the actions by Musk and Tesla artificially increased Tesla's stock price.