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Report: Feds Have Launched a Criminal Fraud Investigation into Tesla

By NexChange
Financial Services

Having already been served with a subpoena by the Securities and Exchange Commission as part of a civil investigation into Elon Musk’s tweet about wanting to take his company private, Tesla is now also facing a criminal fraud probe by the U.S. Department of Justice, Bloomberg reports.

After Bloomberg reported on the criminal investigation on Tuesday – having spoken to two anonymous sources about the probe – Tesla confirmed in a statement to the news agency hat it had been contacted by the Justice Department.

“Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it,” the company said in a statement released Tuesday following Bloomberg’s report of the investigation. “We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.”

The criminal fraud probe into Tesla was launched by the U.S. attorney’s office in the Northern District of California, according to Bloomberg, and is still “in its early stages.”

When Musk tweeted about his desire to take Tesla private, he indicated that he had the “funding secured.” The company’s shares were temporarily halted, but then opened 10 percent higher about two hours later.

However, Musk’s claims of having funding secured were quickly called into question, despite the fact that Musk tried to clarify this point in a follow-up blog post in which he asserted that it would come from the Saudi Arabian sovereign fund. The SEC’s probe is reportedly zeroing in on Musk’s claim of having the funding secured.

There have been questions about whether Musk’s threat of taking the company private – a threat he quickly decided against following through on –  was done to hurt short-sellers who have bet against Tesla. Musk has long waged a verbal war against these investors, noting in a recent blog post that “as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”

Andrew Left, founder of Citron Research and a well-known short-seller himself, recently sued Musk and Tesla for alleged “price manipulation.” The suit accuses Musk and his company of having “artificially manipulated the price of Tesla securities to damage the Company’s short-sellers, and in the process, damaged all purchasers of Tesla securities by issuing materially false and misleading information.”

In semi-related news, Musk has also been sued by Vernon Unsworth, the British cave explorer who led the rescue mission of a youth soccer team trapped in a Thailand cave in July. Unsworth sued Musk for libel and slander after Musk referred to him on Twitter as a “pedo guy” and “child rapist.”

Photo: Getty iStock

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