Elon Musk just discovered that being the richest man in the world and buying Twitter still can’t give him the unlimited freedom of speech that he craves — at least as long as the federal Securities and Exchange Commission has anything to say about it.
The saga of Musk’s pursuit and eventual capture of a controlling stake in the social media platform to make it a private company has been much written about in the media the past week.
What hasn’t been mentioned much, however, is the fact that the billionaire is still subject to a consent decree with the SEC that requires there mandatory pre-approval of any of his tweets that could potentially effect stock prices, a decree that U.S. District Judge Lewis Liman just ruled will continue to remain in place despite Musk’s imminent acquisition of Twitter.
The consent decree came about after Musk posted a tweet to his 22 million Twitter followers that said he was considering making his electric vehicle behemoth Tesla a private company, and offered $420 per share while claiming that he had the funding for the transaction all lined up.
Tesla’s stock jumped significantly higher on the news, but unfortunately for Musk, the SEC determined that the financing of the deal had not in fact been pre-arranged, making the CEO’s tweet a form of market manipulation that the commission would not allow.
Eventually, Musk was forced to sign the consent decree the required any of his potentially market-moving social media posts to be pre-approved by the SEC.
As the world’s richest man and a noted first amendment advocate, it’s not surprising that Musk would use his wealth to hire a team of lawyers to fight the SEC to remove the consent decree and restore his unlimited free speech rights on his newly purchased platform.
What may be surprising, however, is the fact that the judge did not bow down to his wealth and power and ruled against Musk, leaving the SEC restrictions in place for now.
“With regard to the First Amendment argument, it is undisputed in this case that Musk’s tweets are at least presumptively ‘protected speech,’” Judge Liman wrote in his 22-page ruling today. “At the same time, however, even Musk concedes that his free speech rights do not permit him to engage in speech that is or could ‘be considered fraudulent or otherwise violative of the securities laws.’”
“Moreover, to the extent that the consent decree imposes an additional restriction on Musk’s speech by requiring him to obtain pre-approval of his communications about Tesla, ‘parties can waive their First Amendment rights in consent decrees and other settlements of judicial proceedings,’” Liman continued.
Re-examining the reasons for the consent decree, the judge determined that Musk had not taken the restrictions particularly seriously, given that he had subsequently made several posts regarding his finances and Tesla’s performance without seeking the required clearance.
Judge Liman was not swayed by the argument made by Musk’s lawyers that he had only agreed to the decree because he was under economic duress.
“None of those arguments hold water,” Liman wrote, before stating the obvious. Musk was “already a multibillionaire in 2018 and one of the wealthiest individuals in the world” when he signed the consent decree, he noted.
Liman also called Musk’s excuses that his offending tweets were meant as “a statement of pride and optimism,” rather than meant to be deceptive as bordering “on the risible.”
It’s ironic that Elon Musk, having taken on a considerable amount of debt to finance his purchase of Twitter and advance his permissive interpretation of freedom of speech on social media platforms, now will still be constrained in what he can say on the platform he will soon own.
Karma is a bitch.
Original reporting by Adam Klasfeld at Law & Crime.