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SEC 'investigating Elon and brother Kimbal Musk's trading after Tesla CEO pledged to sell on Twitter

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The U.S. Securities and Exchange Commission is investigating whether recent stock sales by Tesla Chief Executive Elon Musk and his brother Kimbal Musk ‘violated insider trading rules’, the Wall Street Journal reported on Thursday, citing people familiar with the matter.

The investigation began last year after Kimbal sold shares of the electric carmaker valued at $108 million.

It came one day before Musk polled Twitter users asking whether he should offload 10% of his stake in Tesla. There followed a significant drop in the electric car maker’s share price. 

US market regulators are probing whether Tesla boss Elon Musk and his brother violated insider trading rules in connection with the selling of shares last year

US market regulators are probing whether Tesla boss Elon Musk and his brother violated insider trading rules in connection with the selling of shares last year

Tesla's stock value fell sharply after Elon Musk posted a Twitter poll asking whether he should sell 10 percent of his stake in the company

Tesla’s stock value fell sharply after Elon Musk posted a Twitter poll asking whether he should sell 10 percent of his stake in the company

Kimbal Musk did not know about the Twitter poll ahead of it, Elon Musk told the Financial Times in an email, adding that his lawyers were ‘aware’ of the poll.

Tesla shares fell sharply in the wake of Musk’s twitter poll.

An earlier settlement with the SEC required his public statements about the company’s finances and other topics to be vetted by its legal counsel.

The SEC issued a subpoena on November 16, ten days after Musk’s poll, seeking information related to some financial data.

The probe is looking into whether Elon Musk told his brother, who is also a member of the Tesla board of directors, that he would post the tweet and whether Kimbal Musk then traded, the Journal reported. 

The filing said Kimbal donated 25,000 shares to charity in addition to selling 88,500 shares. After the sale, he still owned 511,240 shares. 

The Securities and Exchange Commission launched its probe after Kimbal Musk, pictured, sold $108 million in Tesla stock last year

The Securities and Exchange Commission launched its probe after Kimbal Musk, pictured, sold $108 million in Tesla stock last year

Tesla and SpaceX Chief Executive Officer Elon Musk hugs his brother Kimbal Musk during an event in Florida, in May 2020

Tesla and SpaceX Chief Executive Officer Elon Musk hugs his brother Kimbal Musk during an event in Florida, in May 2020

Employees and managers of a listed company should not normally buy or sell securities when they are aware of information that has not yet been made public. 

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.

The richest man in the world is already in open conflict with the SEC because of a 2018 tweet in which he stated that he had the appropriate funding to take Tesla off the stock market, without providing proof of it.  

His presence on Twitter has seen the CEO often joke complete with subtle references to marijuana. 

One of his most memorable tweets came in August 2018 when he jokingly said he was ‘considering taking Tesla private at $420. Funding secured’. 

It led to criticisms of his impulsive Twitter use and he was slapped with fraud charged from the SEC for misleading investors. He ultimately settled for $20 million. 

The number 420 is cannabis culture slang for marijuana use. 

Elon Musk's presence on Twitter has seen the CEO often joke, complete with subtle references to marijuana and getting high on the drug

Elon Musk’s presence on Twitter has seen the CEO often joke, complete with subtle references to marijuana and getting high on the drug

Musk and Tesla each agreed in that case to pay $20 million as part of a settlement that also imposed strict rules on his use of social media, requiring pre-approval from Tesla counsel over statements with key financial information. 

A Tesla lawyer reignited the battle over the settlement by sending a letter to a judge last week, accusing the SEC of harassing him and Tesla with an ‘endless’ and ‘unrelenting’ investigation to punish him for being an outspoken critic of the government.

The letter also accused the SEC of dragging its feet in distributing the $40 million to investors, while it has cracked down on Musk’s use of social media. 

Elon Musk’s share sales in November were automatically executed according to a trading plan he had created on September 14, showed a filing disclosing share sales, including stock options that were supposed to expire in 2022. 

Tesla’s stock has fallen about 33% since Musk began selling billions of dollars worth of shares on November 8, few days after the poll where 58% of voters asked him to sell.

Tesla and Kimbal Musk have not commented on the report. The SEC has declined to comment.

One billionaire and two millionaires ain't bad for a mother of three. Indeed, Mother Maye Musk's successful children - Elon, Kimbal and Tosca, not pictured, all founded companies and are leaders in their chosen pursuits: tech, restaurants and entertainment

One billionaire and two millionaires ain’t bad for a mother of three. Indeed, Mother Maye Musk’s successful children – Elon, Kimbal and Tosca, not pictured, all founded companies and are leaders in their chosen pursuits: tech, restaurants and entertainment

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