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> That telegraphs a pretty lenient stance on misstatements that aren't completely fabricated

American commercial law goes out of its way to avoid criminalizing stupidity. At a certain level, the difference between a genius and a madman is the genius was correct. They are indifferentiable without the benefit of hindsight.

The nail in Elon's coffin (or lack thereof) will probably revolve around the degree to which he documented his animus towards short sellers in the days leading up to the misstatement.

Nah, it's clear Musk hates short sellers. That's not the issue. Nor is his desire to hurt them. The question is whether he had scienter when misstating the finality of the deal he was negotiating.

> That's not the issue. Nor is his desire to hurt them.

That's a huge issue. If he made his misstatements with the intent of hurting short sellers, that's criminal fraud. If he just made a material misstatement, with no intent to harm anyone, it's a civil case.

You inserted "intent". That is the key question, not whether he dislikes short sellers.

Every CEO dislikes short sellers, and nearly every CEO makes "material misstatements" now and then. What separates that from fraud is what the SEC focused on in their comment: scienter.

You keep throwing around the word "scienter" without understanding what it is.

Scienter just means intent. It's literally just the fancy legal term for intent.

Thus, it matters very much that Musk has a history of trashing short sellers and wishing harm to them, because they can use that history to establish that his tweet was made with the intent to defraud market participants and materially affect the price of Tesla's stock.

Especially the "funding secured" bit. You don't say "secured" if it's not really secured. There is no legal interpretation where "secured" is a harmless mistake.

I have been using scienter and intentionality interchangeably. I think it is you who is throwing around fancy-sounding terms like "legal interpretation" without really knowing what they mean.

Again, every CEO dislikes short sellers and literally everything they do to talk up the company hurts shorts, by definition. You don't need any tweets to establish that. It's a given. And every CEO misstates things and makes errors and in big companies every statement moves the stock price. The issue is intent.

What you are doing is focusing on the misstatement, adding in fancy sounding terms like "legal interpretation", and whipping that up into intent to defraud. But as the SEC explicitly addressed in the cited comment, they set the "state of mind" bar higher than mere misstatements. You are going to need more than that to establish scienter.

Your fancy term aside, there actually are other interpretations of his comment. He may have been overzealous. He may have overestimated his investors intent.

Let's look at it another way. Musk is a reasonably smart guy. How far was he going to get with this alleged scheme to intentionally defraud the market? How long until everyone realized the funds were not actually secured and the fraud was revealed? Like, 2 hours? That would be the stupidest fraud in the history of frauds. The conclusion is that, perhaps he actually believed the deal would come together. Erroneously, but erroneous statements are not enough for fraud; the key factor is state of mind.

> The nail in Elon's coffin (or lack thereof) will probably revolve around the degree to which he documented his animus towards short sellers in the days leading up to the misstatement.

That and if he's able to show he really thought funding could have been secured but fell through. IIRC we still don't know the full story on that.

> if he's able to show he really thought funding could have been secured but fell through

"Funding secured" and "funding to be secured" are materially different terms. The point of "secured" is it's been bindingly, definitively agreed upon in a way that makes falling through very, very difficult.

His best defense is, absurdly, arguing a seasoned CEO doesn't understand what "funding secured" means. He might be about to inject enough doubt into a jury to avoid criminal charges, but I don't think that will outweigh the preponderance of evidence which is required for a civil judgement.

Fortunately for him, he's an engineer with thumbs and a screen, not a lawyer. I don't think it's particularly likely that this goes nuclear on Musk or Tesla but it's definitely absurd, as you said.

He's a CEO and is fully responsible for all matters of Tesla finances. If Mr. Musk is too ignorant of the law to properly run a company, then he will be removed.

But that's the SEC's investigation. The deal with the article today, is that the DoJ... aka the FBI is beginning to get involved. This suggests that the FBI is concerned with CRIMINAL issues with regards to that tweet. Criminal penalties looks unlikely IMO, but who knows what the FBI manages to dig up?

In either case, the FBI looking into it doesn't look good at all. If anything, it helps solidifies the SEC (non-criminal) case of negligence.

He doesn't even need to do that! The feds need to prove he never intended to take Tesla private, or that "funding secured" was somehow isolated from those intentions and tweeted disingenuously to move the stock price. Good luck with that -- all evidence is to the contrary (talks had taken place and the Saudis have entered the market in earnest, and relevant emails had been sent out across the entire company). It was a dumb tweet for a lot of reasons, and it's reasonable to subpoena emails and investigate (and obviously civil claims and losses are another story), but dwelling on "fraud" of all wrongs here is downright silly.

I'm no expert, but surely there are financial crimes other than fraud.

Yes, it can be an oversimplification, but in this case it isn't. He clearly wanted to pump up the stock price and screw short sellers (he threw lots of indicators in the public space), and his statement was clearly and knowingly false. There was no secured funding.

Optimism might justify a statement like "final stages of signing funding" or "almost closed the deal" or even "funding as good as secured" -- there might be ambiguity there. Not for "funding secured".

This is as close to textbook as you can get.

> He clearly wanted to pump up the stock price and screw short sellers (he threw lots of indicators in the public space), and his statement was clearly and knowingly false. There was no secured funding.

No this is not textbook at all. See previous citation from the SEC re: intentionality as a key element in criminal fraud.

"Clearly and knowingly false" is just a serious-sounding way to say a misstatement. Did Musk not actually believe in his heart that the deal was basically done? It wasn't, of course, but it takes more than being incorrect to constitute fraud. It takes intent to do something you know is wrong. Wishful thinking may be fraud but it is not necessarily textbook fraud.

not to mention that what his tweet said was "Secured funding." (many news organizations misquote it as "Funding secured.")

In English, the sentence "Secured funding" is ambiguous in meaning: as a shorthand sentence, it could mean "we would only use secured funding for a transaction like this".

"Secured debt" is a thing, and therefore secured funding is a thing. Unless he clarified it someplace else in a way that was not in his favor, there is plenty of wiggle room in that sentence.

Am I missing something? The tweet[0] says no such thing.

[0] https://twitter.com/elonmusk/status/1026872652290379776?ref_...

> not to mention that what his tweet said was "Secured funding." (many news organizations misquote it as "Funding secured.")

This is not true.

https://twitter.com/elonmusk/status/1026872652290379776

It might be gross incompetence rather than fraud you’re saying.

>Did Musk not actually believe in his heart

So you're saying that, the way securities law works, personal optimism is all it takes to justify any representation of any upcoming financing terms? There's no requirement beyond what's in his heart?

I'm saying the idea of just making a misstatement doesn’t necessarily rise to the level of fraud. You have to do something with intentionality.

Oops, I mean I didn't say that. The head of the San Francisco SEC office did.

Yes, but proving intent is the easy part of this, what with Musk's propensity to trash-talk short-sellers.

Disliking short sellers is not the same as intent to defraud the public. Every CEO dislikes short sellers. Intent to commit fraud is absolutely the hardest part of this to prove.

Cool, now we can retread the part where I expressed skepticism that personal optimism is carte blanche to represent any "secured" investment terms to the public.