Why is Elon Musk Being Sued? SEC Files Lawsuit for Alleged Securities Fraud

The United States Securities and Exchange Commission filed a lawsuit against Tesla CEO and founder Elon Musk Thursday for securities fraud.

An investigation into the company was started after Musk tweeted in August about plans to take the company private. Musk tweeted on August 7, "Am considering taking Tesla private at $420. Funding secured." Followed up with a tweet that said, "Shareholders could either to sell at 420 or hold shares & go private."

He had been engaged in discussions about the funding with the Saudi Arabian sovereign wealth fund, CNBC reported.

Tesla's stock plummeted more than $30 a share in after-hours trading following the announcement of the lawsuit.

Part of the suit alleged that, "Musk's statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock's then-current share price, the funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote. In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source."

A statement issued by Musk on August 24 announced that he no longer planned to take the company private. "Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was 'please don't do this,'" said the notice from Musk.

Tesla did not immediately respond to Newsweek's request for comment Thursday.

This is a developing story and will be updated as more information becomes available.

tesla elon musk lawsuit
Elon Musk, the co-founder and chief executive of Electric car maker Tesla, speaks during a ceremony in Dubai on February 13, 2017. Musk was sued Thursday for securities fraud. Karim Sahib/AFP/Getty Images