Tesla CEO Musk Accused of Insider Trading, Facing Lawsuit Over Stock Sales

On a recent Tuesday, June 11, a startling accusation was made against Tesla CEO Elon Musk. An institutional shareholder filed a lawsuit claiming that Musk had used insider information to sell off Tesla stock, resulting in billions of dollars in profits for himself and his brother, Kimbal Musk.

The lawsuit, filed at the Delaware Chancery Court, alleges that the Musk brothers sold a combined $30 billion in Tesla stock between late 2021 and the end of 2022, just before information that would negatively impact the stock became public. It is claimed that Musk sold the shares at inflated prices by concealing his plan to use the proceeds to buy the social media platform Twitter, later renamed X. The lawsuit also suggests that Musk sold Tesla stock knowing that the car deliveries had fallen significantly below public projections.

The lawsuit further accuses Musk of being disloyal to Tesla by diverting Tesla employees to work at X and causing Tesla to start paying for advertising on Twitter after he bought the platform. The Employees' Retirement System of Rhode Island, the plaintiff in the lawsuit, expressed concerns about Tesla's board of directors not effectively overseeing Musk's conflicts of interest.

Response and Regulatory Probe

Neither Musk nor Tesla responded to requests for comments regarding the lawsuit. Musk’s actions are not going unnoticed as he is currently under a regulatory probe to determine if he violated federal securities laws when he purchased Twitter stock in 2022.

It is important to note that this is not the first lawsuit against Musk for similar allegations. Another Tesla shareholder, Michael Perry, filed a suit last month accusing Musk of insider trading when he sold over $7.5 billion of shares in the company in late 2022.

The lawsuit also raised concerns about AI chip shipments, suggesting that Musk diverted artificial intelligence semiconductors bound for Tesla to his company X and xAI, raising worries about possible prioritization of AI-related development outside Tesla.

Shareholder Concern

The Employees' Retirement System of Rhode Island, who holds about 140,000 shares of Tesla, expressed concern about the alleged disloyalty and conflicts of interest. The institution seeks the court's intervention to direct Elon Musk to return the purported "unlawful profits."

As these legal issues unfold, the Tesla CEO's actions and decisions are under increasing scrutiny, amid concerns about his management of Tesla, potential conflicts of interest, and claims of insider trading.