The Securities and Exchange Commission reached a settlement of fraud charges on Saturday with Elon Musk, CEO and chairman of Tesla Inc., and with the company that forces Musk’s removal as chairman of the Tesla board and the payment of $40 million in penalties, $20 million by Musk personally and $20 million by Tesla.
Musk will be ineligible to be re-elected chairman for three years.
The SEC filed a complaint against Musk on Friday that alleged when he tweeted on Aug. 7 that he could take Tesla TSLA, -13.90% private at $420 per share — a substantial premium to its trading price at the time — he knew that the potential transaction was uncertain and subject to numerous contingencies. Instead Musk had tweeted that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.
According to the SEC, Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the prospective transaction lacked an adequate basis in fact. Musk’s misleading tweets caused Tesla’s stock price to jump by more than 6% on Aug. 7, and led to significant market disruption, including hundreds of pages of complaints filed with the SEC, according to a reporting by online media site the Outline, whose reporters said they had obtained 147 pages of complaints about Musk from investors in Tesla.
See: Tesla investors complained to the SEC — and here’s what they said
Read also: Why legal experts say the SEC has a strong case against Musk
The SEC also charged Tesla on Saturday with failing to have in place the required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla also has agreed to settle and which will result in comprehensive corporate-governance modifications and other reforms at Tesla. In addition to Musk’s removal as chairman of the Tesla board, to be replaced by an independent chairman, Tesla will also be required to appoint two new independent directors to its board. The settlements are subject to court approval.
Musk and Tesla agreed to settle the charges against them without admitting to or denying the SEC’s allegations.
See also: The SEC vs. Elon Musk: What the lawsuit means right now for Tesla investors