Tesla CEO Elon Musk accused in lawsuit of fraud over going-private proposal

Tesla Inc and Chief Executive Elon Musk were sued on Friday by an investor who said they committed securities fraud in a scheme to "completely decimate" short-sellers that included Musk`s proposal to take the electric car company private.

The proposed class-action complaint filed by Kalman Isaacs in San Francisco federal court accused Tesla and Elon Musk of trying to artificially manipulate the company`s stock price.Image source: Reuters

Tesla Inc and Chief Executive Elon Musk were sued on Friday by an investor who said they committed securities fraud in a scheme to "completely decimate" short-sellers that included Musk`s proposal to take the electric car company private. The proposed class-action complaint filed by Kalman Isaacs in San Francisco federal court accused Tesla and Musk of trying to artificially manipulate the company`s stock price.

It said this occurred largely through a series of tweets by Musk on Aug. 7, including when he said he might take Tesla private and that there was "funding secured." Musk`s tweets helped push Tesla`s stock price more than 13 percent above the previous day`s close. The stock has since retreated, in part following reports that the U.S. Securities and Exchange Commission had begun inquiring about Musk`s activity.

Tesla did not respond to a request for comment. Isaacs accused Musk of making false and misleading statements to inflate Tesla`s stock price, and that Tesla "doubled-down" on those statements by failing to correct them. According to the complaint, Isaacs bought 3,000 Tesla shares on Aug. 8 to cover his short position, or bet that the price would decline, in the company.

The complaint said the class period begins on the afternoon of Aug. 7, when the defendants launched their "nuclear attack" on short-sellers, and ends the next day.

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