SEC Quizzes Elon Musk, Brother, On Insider Trading Of Tesla Shares

Tesla CEO Elon Musk and his brother are under investigation by the Securities and Exchange Commission (SEC) for possibly violating insider trading rules, according to media reports, Chris Isidore and Matt McFarland reported for CNN Business.

Photo Insert: From vehicle recalls, to his investment in SolarCity, and the hiccup in the operation of the Gigafactory in Berlin, the Tesla CEO has been under a lot of fire of late. This is ontop of being at odds with regulators for refusing to pay taxes.

The Wall Street Journal, citing unnamed people familiar with the probe, said the investor watchdog is looking into sales of Tesla shares by Kimbal Musk, a Tesla board member, just before his brother Elon announced on Twitter that he would sell 10% of his own Tesla holdings, a move that sent Tesla shares sharply lower in the days that followed.

Tesla did not respond to a request for comment on the reports, and CNN Business hasn't independently confirmed the investigation.

Financial Times also reported that Musk denied wrongdoing, telling the paper that the investigation is "simply more evidence of Stevie grinding his very tiny axe yet again."

The reference is apparently to Steven Buchholz, an SEC staffer in the agency's San Francisco office, who is involved in SEC enforcement cases involving Musk and Tesla. Musk's lawyers also filed a complaint Monday charging that there had been leaks by the SEC of its probe into Musk, without detailing what those leaks revealed. The Journal story that disclosed the probe was published on Thursday.

The investigation reportedly centers on Kimbal Musk's sale of 88,500 Tesla shares in November, for which he received nearly $109 million. The shares represented about 15% of his stake in Tesla at the time. Unlike Elon who has rarely sold stock, Kimbal Musk has regularly sold shares in the company.

On Saturday, November 6 — the day after Kimbal Musk sold his shares — Elon Musk posted a poll on Twitter asking whether he should sell 10% of his shares. Musk claimed in the tweet that the sale would answer criticism that he paid little or no federal income tax, despite being the richest person on the planet.

The main factor in the sale was not the Twitter poll but the fact that he had to exercise stock options that were due to expire this August, a move that would create significant taxable income.

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