May 21, 2024

US Supreme Court refuses to hear Elon Musk's dispute over SEC settlement

The U.S. Supreme Court on Monday denied Elon Musk's request to throw out part of a settlement with the Securities and Exchange Commission that would limit the billionaire's public statements about his electric car company Tesla.

The justices rejected Musk's appeal of a lower court ruling upholding the 2018 settlement, which the SEC criticized in a case that it described as “false and misleading” after he said on social media that he had “secure financing” for taking Tesla private.

With the settlement, Musk settled an SEC lawsuit accusing him of defrauding investors. As part of the deal, Musk and Tesla each paid $20 million in fines, and he relinquished his position as chairman of the company. Before Musk bought the company and changed its name to X, he agreed to pre-authorize a Tesla lawyer on the social media site, then called Twitter.

Musk later tried to end the pre-approval mandate. His lawyers described it in a court filing as a “government-imposed vandalism order,” an illegal restriction on his speech.

U.S. District Judge Louis Liman in Manhattan rejected Musk's request in 2022. A three-judge panel of the 2nd U.S. Circuit Court of Appeals in Manhattan upheld that decision in 2023.

The 2nd Circuit ruled that Musk was allowed to review his Twitter posts and was not entitled to reconsider the matter “because he has now changed his mind.” The 2nd Circuit Court of Appeals last year denied Musk's request to rehear the case, prompting him to appeal to the Supreme Court.

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Musk's lawyers argued that the SEC had no right to impose a “gag clause” as a settlement condition, saying it violated the First Amendment to the US Constitution, which prohibits government restrictions on free speech.