Elon Musk cleared of fraud in ‘secured funding’ lawsuit

A jury deliberated for about an hour, then found Tesla CEO Elon Musk was ‘not responsible’ for losses suffered by investors who accused him of fraud based on his tweets in August 2018 that he planned to take the company private, adding “secure financing”. “, according to reports from The New York Times and CNBC.

The deliberation was exceptionally quick. While cases can be difficult to directly compare, juries have taken days to deliberate on verdicts for Elizabeth Holmes and Martin Shkreli, both on trial for fraud. The decision for Musk took a fraction of that time.

With Musk in attendance, the jury in the billionaire’s securities fraud trial heard closing arguments from a lawyer representing a class of Tesla investors who say they suffered heavy losses as a result of Musk’s tweet. They also heard from Musk’s lawyers, who claimed all he was guilty of was “poor choice of words.” Their decision allows Musk to walk away unscathed rather than paying billions of dollars in damages.

For weeks, the jury has heard from a litany of witnesses — including Musk himself — recounting the events leading up to and following the August 7, 2018 tweet.

Musk said meetings with Saudi Arabia’s sovereign wealth fund left him confident he would have the funds to take Tesla private. But within weeks, Musk had scrapped the deal, leaving some Tesla investors with billions of dollars in the hole. But even before hearing from witnesses, District Court Judge Edward Chen asked the jury to rule Musk’s tweet as fake, letting them decide whether Musk knowingly misled shareholders, causing them to lose money.

Musk previously agreed to a $40 million settlement with the Securities and Exchange Commission over the tweet, which required him to relinquish his position as company chairman but not admit to wrongdoing. (Musk has since argued that he was coerced into participating in the settlement.)

In his closing argument, plaintiffs’ attorney Nicholas Porritt said Musk should be held accountable for tweets that had already been found to be false. “This case is ultimately about whether the rules that apply to everyone should also apply to Elon Musk,” Porritt explained. “Billionaires cannot operate under a different set of rules.”

Porritt presented the jury with testimony from the Tesla investors who filed the lawsuit as well as various expert witnesses who presented data he said showed how stock price fluctuations in and around the Aug. 7 tweet caused them to lose money.

“Elon Musk posted tweets that were false, with a reckless disregard for the truth,” Porritt said. “And those tweets hurt investors, a lot of hurt. That’s all it takes to find accountability here.

Witnesses from the investment bank previously said that days after the tweet they were still trying to work out how the deal would be structured. Musk had testified that, even without the Saudi money, he believed he could take Tesla private with his own wealth, including his stake in his private space company SpaceX, as the basis for the deal.

But Porritt said Musk’s tweet was “a lie”, proven by text messages between the Tesla CEO and Yasir Al-Rumayyan, the governor of Saudi Arabia’s Public Investment Fund. Musk tried to intimidate the Saudi official, threatening to cut him off unless he publicly affirmed the privatization deal, the lawyer said.

Tesla should also be held accountable, he argued, for the conscious decision to allow Musk and his Twitter feed to serve as the primary source of corporate communication. “Tesla consciously chose to make Elon its public image,” Porritt said, “and in particular its Twitter feed as its primary news and information. [source].”

By comparison, Spiro’s final argument was sprawling and at times difficult to follow, making several references to Musk as a “kid on the witness stand” or a “kid from South Africa.” (Musk is 51.)

Spiro’s main argument hinged on convincing the jury to believe that Musk had tweeted “secured funding” because he sincerely believed he would have “sufficient funding” to take Tesla private. The tweet was “technically inaccurate”, Spiro acknowledged, but not cheating.

“Just because it’s a bad tweet doesn’t mean it’s a fraud,” Spiro said.

“I think I heard [Porritt] say you should assume that Elon Musk committed fraud. Well, he didn’t. Not even close,” Spiro said. “Elon Musk was considering taking Tesla private, and he could have. Funding was not a problem, that is the basic truth, which will never change.

Holding Musk responsible for fluctuations in Tesla’s stock would represent a fundamental misunderstanding of how the market works, Spiro argued. “Stocks move all the time for many reasons,” he said. “They want to punish Musk for using two words, but they’re always on the move.”

Spiro told jurors they didn’t have to like Musk or his tweets to determine the lawsuit was unfounded. “Some of his tweets, I don’t like either,” Spiro concluded.

Before the attorneys began their presentations, Musk laughed off a joke Chen made about whether it’s “metaphysically possible” for plaintiffs to prove a “material misrepresentation.” Apparently he too offered his help when the court encountered computer problems.

But minutes before the jury was seated, Musk was not thinking about his own fate or the outcome of the case. He was tweeting about Twitter.

Updated February 3, 6:40 p.m. ET: Updated to reflect the jury’s decision and Tweeter by Elon Musk.