Elon Musk loses bid to end SEC gag over tweets

NEW YORK, May 15 (Reuters) – A federal appeals court on Monday rejected Elon Musk’s bid to amend or end his 2018 securities fraud settlement with the U.S. Securities and Exchange Commission that required a Tesla Inc ( TSLA.O ) lawyer to approve some of his tweets in advance.

The Second U.S. Circuit Court of Appeals in Manhattan rejected Musk̵[ads1]7;s claim that the SEC exploited his consent decree to conduct bad faith, harassing investigations that violated his free speech rights under the U.S. Constitution.

Musk’s decree resolved an SEC lawsuit that accused him of defrauding investors with an August 7, 2018 tweet that he had “secured financing” to take his electric car company private.

It required prior review of tweets that may contain material information about Tesla. Musk and Tesla also paid $20 million in civil fines each, and Musk gave up his role as chairman.

In the appeal, Musk’s lawyers called the pre-approval mandate a “government-imposed gag” that amounted to an illegal prior restriction on his speech.

But the appeals court’s three-judge panel said the SEC had opened only two consecutive investigations into Musk’s tweets, and that those tweets “plausibly violated” the decree’s terms.

The panel said the SEC’s “limited, appropriate inquiries in this case have not made compliance with the consent decree “substantially more burdensome” for Musk, as he had claimed.

It also said that Musk chose to allow screening of his tweets and that he had no right to return to the matter “because he has now changed his mind.”

Alex Spiro, a lawyer for Musk, said in an email: “We will seek further review and continue to bring attention to the important issue of government restrictions on speech.”

The SEC declined to comment.

Monday’s ruling upheld an April 2022 ruling by U.S. District Judge Lewis Liman in Manhattan.

Liman called Musk’s arguments a “regret” over demands he no longer wanted to comply with now that Tesla had “become, in his estimation, almost invincible.”

Musk bought Twitter for $44 billion in October, and runs the rocket and spacecraft maker SpaceX. He is the world’s second richest person, according to Forbes magazine.

In February, a jury in San Francisco found that Musk was not liable for investor losses due to his “funding secured” tweet.

The case is SEC v Musk, 2nd US Circuit Court of Appeals, No. 22-1291.

Reporting by Jonathan Stempel in New York

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