A former SEC chairman outlined the worst case scenario for Elon Musk now that the SEC has sued him
- The former SEC chairman Harvey Pitt told Business Insider in August that Tesla CEO Elon Musk could be banned from serving as an officer or director of a public company after reports that the agency was investigating his comments about taking Tesla private.
- But the SEC's lawsuit is not the only potential threat to Musk.
- Bloomberg reported earlier this month that the Department of Justice has opened an inquiry into Tesla, which could ultimately result in a prison sentence for Musk.
- For Musk to serve jail time, it would have to be proven that he committed a crime beyond a reasonable doubt, Pitt said.
The former SEC chairman Harvey Pitt told Business Insider in August that Tesla CEO Elon Musk could be banned from serving as an officer or director of a public company after reports that the agency was investigating his comments about taking Tesla private.
The SEC filed a lawsuit against Musk on Thursday, alleging that his comments were "false and misleading." The agency also said in the lawsuit that it seeks to bar Musk from being an officer or director of a public company.
On August 7, Musk said that he had "funding secured" to convert Tesla into a private company at $420 per share and only needed a shareholder vote to confirm a go-private deal. In its lawsuit, the SEC alleges that Musk had not acquired the necessary funding or even discussed the terms he mentioned with any potential funding sources.
According to Pitt, mentioning the possibility of taking Tesla private on Twitter, while ill-advised, would not trouble regulators. Instead, it was the tweet's final two words, "funding secured," that had the potential to create problems.
"'Funding secured' is a very strong term, and it has legal consequences," Pitt said.
But the SEC's lawsuit is not the only potential threat to Musk. Bloomberg reported earlier this month that the Department of Justice has opened an inquiry into Tesla, an action that could ultimately result in a prison sentence for Musk. For Musk to serve jail time, it would have to be proven that he committed a crime beyond a reasonable doubt, Pitt said.
Pitt reiterated the risks Musk faces on Thursday in an interview with CNBC's Closing Bell.
"He can face a number of penalties ... he can have fines imposed against him, he can effectively be barred for a period of time or permanently from serving as a principal officer or a director of a public company," he said.
Read more about the SEC's lawsuit against Elon Musk:
- The SEC sues Elon Musk, wants to bar him from being CEO of a public company
- The SEC alleges that Elon Musk's $420 price point was a weed reference to amuse his girlfriend
- Elon Musk can blame 4 tweets for his SEC lawsuit
- Elon Musk responds to SEC's lawsuit, says he's 'deeply saddened and disappointed'
Have a Tesla news tip? Contact this reporter at mmatousek@businessinsider.com.