US Regulator Sues Musk for Fraud, Seeks to Remove Him From Tesla

Elon Musk has been fined $20million and will be forced to resign as chairman of Tesla after reaching a settlement on fraud charges.

Shares in Tesla plunged 15 per cent last night, wiping about £6billion off the company as founder Elon Musk fought for his future following fraud charges.

According to the legal docs.

As part of the settlement, Musk will step down as chairman of the board and will be replaced by an independent chairman, the SEC said.

"While the outcome of the case is uncertain, if the SEC prevails Tesla may have to find a new CEO", analyst Colin Langan said in a note.

As the month went on, the story changed: Musk said that there had been discussions with potential Saudi backers, but that they didn't go ahead with a firm, contingency-free commitment to funding.

Regulators said Musk had barely formed a take-private proposal when he tweeted that it was all but certain in early August, sending Tesla's stock soaring on the promise of what would have been one of the largest private-buyout deals in corporate history. However, it's not surprising that Musk would settle with the SEC so quickly, even after reports that he didn't want to stain his reputation with a settlement or be "untruthful" to himself.

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Tesla did not respond to a request for comment.

"Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees", they said. Twelve minutes after the first tweet, Tesla's head of investor relations texted Musk's chief of staff to ask whether Musk's announcement was "legit", the SEC said. Breakingviews cleverly posits that a Musk-less Tesla will reveal the true value of the innovative but financially challenged company.

Tesla shares dropped 13 percent to $267.38, and have tumbled 29 percent since Musk's August 7 tweet saying he had financing arranged to take the company private at $420 a share.

The Silicon Valley billionaire, who within three weeks of the tweets had abandoned the plan to delist Tesla, said overnight he had done nothing wrong and the company's board reiterated its support for him. "In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source", the SEC said in the complaint filed in federal district court in the Southern District of NY.

That possibility, however remote, casts a pall on the final days of a rocky quarter and is likely to renew concerns about Tesla's lack of an operating chief or other clear No. 2.

Some analysts are concerned about what Musk departure could do to Tesla's stock.