Tesla CEO Allegedly Profited Billions Using Non-Public Information
Elon Musk (TSLA), the CEO of Tesla, has been accused of making billions of dollars in profits from Tesla stock sales using insider information, according to a lawsuit filed by the Employees’ Retirement System of Rhode Island (ERSRI) on Tuesday. The lawsuit seeks to compel Musk to return the alleged “unlawful profits.”
The legal action comes just two days before a critical vote by Tesla shareholders on whether to reinstate Musk’s $56 billion pay package. This vote follows a Delaware judge’s January ruling that voided the package, citing Musk’s improper control over the process.
According to the lawsuit, Musk and his brother, Kimbal Musk, a Tesla director, sold a combined $30 billion worth of Tesla stock between late 2021 and the end of 2022. The sales were allegedly timed before adverse information about Tesla’s performance became public. The ERSRI claims Musk sold these shares at inflated prices while hiding his plans to use the proceeds to purchase Twitter, now renamed X. Additionally, the lawsuit alleges Musk sold Tesla stock knowing that the company’s car deliveries had significantly underperformed against public expectations.
Neither Musk nor Tesla has responded to requests for comment on the lawsuit.
ERSRI, which holds about 140,000 Tesla shares valued at approximately $24 million, argues that Musk’s actions were disloyal and harmful to Tesla. The lawsuit also criticizes Tesla’s board of directors for insufficiently overseeing Musk’s conflicts of interest.
The lawsuit details several instances of alleged disloyalty, including diverting Tesla employees to work on X and having Tesla pay for advertising on the platform after Musk’s acquisition. Furthermore, it claims Musk helped his AI venture, xAI, hire Tesla employees and redirect AI semiconductors intended for Tesla to X and xAI.
Concerns about Musk’s priorities were heightened last week following reports that AI chip shipments meant for Tesla were being used for other projects. In response to these concerns, Musk posted on X that Tesla lacked the facilities to store and activate the Nvidia AI processors.
This lawsuit follows another recent filing by Tesla shareholder Michael Perry, who similarly accused Musk of insider trading related to his sale of $7.5 billion in Tesla shares in late 2022. Additionally, Musk is under a regulatory investigation to determine whether he violated federal securities laws when he purchased Twitter stock in 2022.
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