Judge OKs $40M Settlement Between Musk and SEC

A federal judge in New York has approved Tesla CEO Elon Musk’s settlement with the Securities and Exchange Commission over Musk’s claim on Twitter that he had secured funding to take Tesla private.

Under the agreement, Musk will step down as chairman of the company and he and Tesla each will pay $20M in penalties. They aren’t allowed to admit or deny any wrongdoing. The money will be distributed to shareholders. Judge Alison Nathan of the U.S. District Court in Manhattan approved the deal on Oct. 16, Bloomberg reported.

The SEC clamped down on Musk after he tweeted on Aug. 7 that he was considering taking Tesla private at a price of $420 per share. “Funding secured,” the tweet said. The deal never happened, but Tesla shares soared right after the tweet, only to fall later when questions began to emerge. Musk later defended the message, saying he had felt confident that a Saudi investment fund would provide the financing but there were still details to work out.

The SEC announced on Sept. 27 that it was suing Musk for what it called false and misleading claims about taking the company private. The suit reportedly came after Musk had refused to settle the case. Days later, he did settle.

With the judge’s approval of the settlement, Tesla skirted the possibility of even more onerous penalties, though it might also have beaten the charges in court. Its shares rose nearly 7 percent on Tuesday.

But by forcing Musk out of the chairman’s seat and requiring the appointment of two outside board members, the arrangement may change the company’s culture. Some shareholders have advocated internal restraints on its freewheeling founder. And Tesla is also facing a Justice Department criminal probe over the “funding secured” tweet, according to a Bloomberg report.

Tesla has been under the microscope as it tries to reach ambitious goals for both making a profit and further advancing its technology. On Oct. 2, the company announced production of 53,239 Model 3s in the third quarter, which it said was in line with its guidance.

It also continues the march toward greater automation. On Tuesday, Musk tweeted that a new, more powerful self-driving chipset would be available within about six months.

The homegrown chipset, which Tesla calls Hardware 3, will be available both in new vehicles and as an upgrade for customers who have paid for the company’s “Full Self-Driving” feature. Current owners will also be able to buy the upgrade. Tesla technicians will swap in the new chipset free of charge.

Musk tweeted on Tuesday that Hardware 3 will increase the performance of Autopilot by between 500 percent and 2,000 percent, boosting the car’s ability to process inputs from cameras and other sensors. A major software upgrade released last month, called Autopilot 9, also improves the system’s capabilities, according to Tesla.

But despite the new silicon and Tesla advertising that its cars already have full self-driving hardware, even the latest software doesn’t allow drivers to take their hands off the wheel and be driven where they’re going. Autopilot 9 brings the system to what Tesla calls “onramp to offramp” automation on controlled-access highways, with the ability to follow curves, understand what lane it’s in and attempt lane changes. Drivers still need to keep their hands on the wheel and watch the road.

Stephen Lawson is a freelance writer based in San Francisco. Follow him on Twitter @sdlawsonmedia.