NEW YORK, May 15 (Reuters) – A federal appeals court on Monday rejected Elon Musk’s bid to amend or end a 2018 securities fraud settlement with the U.S. Securities and Exchange Commission that required Tesla Inc’s ( TSLA.O ) lawyer to approve some. His tweet was premature.
The 2nd US Circuit Court of Appeals in Manhattan rejected Musk’s claim that the SEC acted in bad faith by using its consent decree.
Musk’s order settled an August 7, 2018 SEC lawsuit accusing him of defrauding investors after he tweeted that he was “funding secured” to take his electric car company private.
Tweets that contain important information about Tesla should be pre-screened. Musk and Tesla each paid $20 million in civil penalties, and Musk stepped down as chairman.
On appeal, Musk’s lawyers called the pre-consent order a “government-imposed mask,” an illegal preemption of his speech.
But a three-judge appeals court panel said the SEC had opened two subsequent investigations into Musk’s tweets and said the tweets “plausibly violated” the order’s terms.
As he argued, the panel said the SEC’s “limited, appropriate investigations in this case did not comply with the consent decree that was “substantially too onerous.”
It said Musk had chosen to allow his tweets to be screened and was not entitled to revisit the matter “because he has now changed his mind”.
Musk’s attorney, Alex Spiro, said in an email: “We will review further and continue to focus on the government’s key issue in the speech.”
The SEC declined to comment.
Monday’s decision upheld an April 2022 ruling by U.S. District Judge Louis Liman in Manhattan.
Liman called Musk’s arguments a “regret” of requirements that Tesla no longer wants to adhere to because it “has become, in his estimation, invincible.”
Musk bought Twitter for $44 billion in October and runs rocket and spacecraft manufacturer SpaceX. According to Forbes magazine, he is the second richest man in the world.
In February, a San Francisco jury found Musk not liable for investor losses stemming from his “financial security” tweet.
The case is SEC v Musk, 2nd US Circuit Court of Appeals, no. 22-1291.
Reporting by Jonathan Stempel in New York
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