Elon Musk under investigation for insider trading

Decidedly, Elon Musk and the sheriff of Wall Street still have things to say. The Securities and Exchange Commission (SEC) opened an investigation last year targeting Elon Musk and his brother Kimbal for possible insider trading, reveals the Wall Street Journal.

Remember, last year Elon Musk posted a poll on Twitter asking his followers if he should sell 10% of his Tesla shares to pay his taxes. After obtaining a majority of positive responses, the Tesla boss then complied. He sold 10% of his shares or 16 billion dollars between November and the end of December 2021. So far so good.

The Musk brothers guilty of cheating on Wall Street?

The problem comes from a suspicious maneuver by Kimbal Musk. Elon Musk’s brother has sold 88,500 Tesla shares for $108 million the day before Elon Musk’s tweet. However, in December, Tesla shares logically fell (13% between November and December) following the resale of Elon’s shares.

The SEC is therefore investigating whether Elon Musk has warned his brother of his intention to sell his shares. If this were the case, insider trading would be proven. For those less familiar with financial terms, insider trading is the practice of buying or selling securities while being aware upstream of information that has not yet been made public.

Normally, employees and managers of a listed company do not buy or sell securities outside of automatic disposal plans. These plans are agreed in advance with a specific timetable. This helps prevent conflicts of interest and insider trading. Elon Musk opted for this type of system at Tesla. However, the sale of securities by his brother Kimbal (accompanied by a donation of 25,000 shares to charity) is completely out of this framework.

Les Echos recall that Elon Musk is already in conflict with the SEC for a tweet dating from 2018 in which he said he had the funding to withdraw Tesla from the Stock Exchange, which was false.

The sheriff of Wall Street then asked the billionaire to stepping out of Tesla’s board and to have their tweets checked by a legal department before publication. Elon Musk’s lawyers then filed a motion in court accusing the SEC of “harassment campaign” against the richest man in the world. The judge then considered that this request was “unclear”.

It remains to be seen how far this new investigation by the SEC will lead. In France, insider trading is punishable by 5 years imprisonment and a fine of up to 100 million euros.

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