The SEC probe into Elon Musk and Tesla is reportedly about suspected insider trading with Musk’s brother

The Wall Street Journal is out with a new report that Elon Musk’s lawyer warned about and reveals that the SEC probe into Musk and Tesla is reportedly about a suspected insider trading violation involving Musk’s brother.

As we reported yesterday, things are escalating quickly between Musk and the SEC since a lawyer for the former sent a letter to the court accusing the latter of harassing Musk and Tesla.

It came after Tesla revealed that it was subpoenaed by the SEC late last year without revealing what the investigation was about.

The SEC quickly denied the allegations of harassment, but then Musk’s lawyer came back with another letter, this time accusing the SEC of leaking information about their investigation.

It wasn’t clear on what the lawyer was basing this allegation, but now the Wall Street Journal is out with a report revealing what the probe is about:

“The Securities and Exchange Commission is investigating whether recent stock sales by Tesla Inc. Chief Executive Elon Musk and his brother violated insider trading rules, according to people familiar with the matter.”

Musk’s brother, Kimbal Musk, made a $100 million Tesla share sale the day before his brother announced that he would sell billions worth of Tesla stocks if Twitter votes for it:

“The SEC’s investigation began last year after Mr. Musk’s brother sold shares of Tesla valued at $108 million, one day before Mr. Musk polled Twitter users asking whether he should unload 10% of his stake in Tesla and pledging to abide by the vote’s results. Mr. Musk framed the potential sale as a way to cover any taxes he would need to pay if lawmakers imposed new taxes on unrealized capital gains. Mr. Musk began selling billions of dollars worth of stock a few days after his tweet.”

The sale of shares wasn’t part of a pre-approved plan like some of his previous sales.

The SEC is reportedly investigating whether or not Musk told his brother about his plan and if it constitutes an insider trading violation.

As we reported yesterday, Musk said about the situation with the SEC: “I didn’t start the fight, but I will finish it”. He said that he has been “building a case” against the agency.

Electrek’s Take

Oh boy. What are we talking about here? Is this really what this situation is about? Insider trading?

Call me naive, but I have a hard time believing that the richest man in the world would bother to tell his brother about an upcoming tweet that could possibly affect his hundreds of millions of dollars stake in Tesla by a few million.

On the other hand, why is Musk making such a big deal about the SEC looking into it? If he has nothing to hide about it, let them investigate and move on instead of raising a big stink about it.

I doubt that it’s about any possible insider trading to do with Kimbal.

If anything, I think it might be more about how Musk framed his own sale of Tesla shares – making it look like it was about the Twitter poll regarding rich people paying taxes, when most of the sales were actually planned months before as part of his stock option plan.

He might not want this investigation to reveal more about how this all came about and was framed.

What do you think? Let us know in the comment section below.

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