Elon Musk and Tesla will each pay $20 million and he will step down as chair of the electric vehicle maker as part of a settlement of a fraud charge reached Saturday with the Securities and Exchange Commission.
"The resolution is intended to prevent further market disruption and harm to Tesla's shareholders," Steven Peikin, co-director of the SEC's enforcement division, said in a release.
The SEC brought a fraud charge against Musk after an Aug. 7 tweet about taking the company private for $420 a share, causing a market disruption and its stock price to jump because of the misleading statement.
"Musk knew that the potential transaction was uncertain and subject to numerous contingencies," investigators said in their complaint. "Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact."
Musk and Tesla agreed to the deal but do not admit or deny the allegations, according to the SEC.
As part of the settlement, Musk will be forced to step down and will be replaced by an independent chair. He will not be eligible to be elected chair for three years.
The company will appoint two independent directors to its board, as well as create a committee of independent directors to oversee Musk’s communications.
The $40 million in penalties will be paid to investors through a court-approved process.
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