SEC alleges Tesla CEO Musk's Tweets violated federal securities law

Wil James Murdoch be the new Chairman of Tesla?

Shares of Tesla Inc fell 7 percent on Friday, as David Einhorn's hedge fund Greenlight Capital slammed the electric carmaker the day after Tesla CEO Elon Musk mocked the U.S. Securities and Exchange Commission on Twitter.

Musk has been open about his thoughts on investors who are betting against Tesla known as short-sellers.

Elon Musk tweets and stirs controversy again on the Internet in the wake of his SEC settlement.

Shares of Tesla extended earlier losses after Nathan issued her order, and were down $12.78, or 4.3 percent, at $282.02 in late afternoon trading.

The settlement agreements Musk and Tesla reached with the Securities and Exchange Commission don't include any kind of bar on Musk's continued service as a director of the auto company.

We all know the story by now: Musk suggested on Twitter that Saudi Arabia would be taking Tesla private, sending shares soaring, but changed his mind shortly after, resulting in the SEC filing a lawsuit against Musk saying that he had been manipulating shares.

The tweet on Thursday was "plainly a statement that the SEC's case against Musk lacked merit", Crimmins said.

Tesla Chief Executive Elon Musk has been making headlines for all the wrong reasons in the past few months, and one activist investor thinks it's because he's trying to sabotage his own job. "This hurts shareholders worse than the SEC".

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Additionally, the agreement requires its board to create within 90 days a permanent committee comprised exclusively of independent directors that will oversee the implementation of the settlement SEC and set guidelines for top executives' communications with the public. It sought to bar Musk from being an officer or director of a public company.

The tweet came just hours after U.S. District Court Judge Alison Nathan in Manhattan ordered Musk and the SEC to submit a joint letter justifying the terms of the settlement by October 11.

The New York Times reported Tuesday that James Murdoch had been eyed by some board members as a potential replacement, though outside groups like proxy monitor Glass Lewis have voiced concerns about Murdoch's lack of relevant experience.

Later Thursday, Musk returned to Twitter to deride short-sellers.

Tesla did not immediately respond to a request for comment on what Musk meant by the tweet.

The SEC accuses Musk of violating anti-fraud provisions of the federal securities law.

Following the SEC settlement, Musk agreed to pay a $20m fine and step aside as Tesla's chairman for three years.

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