The Securities and Exchange Commission is investigating whether Tesla Inc. CEO Elon Musk and his brother Kimbal violated securities laws when selling shares in the company last year, according to a person familiar with the matter.
The regulator’s probe is focused on transactions late last year just before Elon Musk polled his Twitter followers asking if he should sell 10 percent of his stake in the company, prompting Tesla’s shares to tumble.
The investigation, reported earlier by The Wall Street Journal, is focusing on whether any insider trading rules were violated, said the person familiar with the matter, who asked not to be named because the probe is private.
The potential probe would escalate Musk’s battle with regulators as they scrutinize his social media posts and Tesla’s treatment of workers, including accusations of discrimination.
Tesla’s shares were up about 3 percent to $786.52 in late-afternoon trading, paring losses amid a broader stock market rout.
The stock has fallen about 33 percent since Musk began selling billions of dollars worth of shares on Nov. 8, few days after the poll where 58 percent of voters asked him to sell.
The SEC, Tesla and Kimbal Musk did not immediately respond to Reuters’ requests for comment.
Hearing denied
Meanwhile Musk and Tesla were denied a court hearing on their claims that the SEC is targeting them with an “unrelenting investigation” in retaliation for criticisms of the government.
U.S. District Judge Alison Nathan on Thursday said it wasn’t clear what the company and its CEO were asking for in a Feb. 17 letter complaining that they were being targeted with “endless probes” by the regulator.
Musk and Tesla accused the SEC of using their settlements of suits over a series of 2018 tweets by Musk to “muzzle and harass” him and the company. They asked for a court conference on the regulator’s alleged failure to distribute $40 million in settlement funds while spending “energy and resources investigating Mr. Musk’s and Tesla’s compliance with the consent decree by issuing subpoenas unilaterally, without court approval.”
The SEC denied the claims in a letter to the judge, saying that agency enforcement staff has been in touch with Musk and Tesla, seeking to address concerns over their compliance with the settlements.
Bloomberg and Reuters contributed to this report.