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15 May, 2023

Musk’s SEC ‘muzzle’ appeal rejected

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The 2nd U.S. Circuit Court of Appeals in Manhattan rejects Musk’s bid to modify or end his 2018 securities fraud settlement with the U.S. Securities and Exchange Commission that requires a Tesla lawyer to approve some of his tweets in advance. (SEC v Musk, 2nd U.S. Circuit Court of Appeals, No. 22-1291.). Musk argued that the SEC exploited his consent decree to conduct bad-faith, harassing investigations that violated his First Amendment free speech rights under the U.S. Constitution. His decree resolved an SEC lawsuit accusing him of defrauding investors with an Aug. 7, 2018, tweet that he had “funding secured” to take his electric car company private. (A San Francisco jury already found Musk not liable for investor losses over the tweet.)

In the appeal, Musk’s lawyers called the pre-approval mandate a “government-imposed muzzle” that amounted to an illegal prior restraint on his speech, but the court says the SEC had opened just two subsequent inquiries into Musk’s tweets, which “plausibly violated” the decree’s terms. The three-judge panel says that the SEC’s inquiries were “limited” and “appropriate,” and “have not made compliance with the consent decree ‘substantially more onerous'” for Musk, who chose to allow screening of his tweets and therefore has no right to revisit the matter “because he has now changed his mind.” Musk lawyer:

We will seek further review and continue to bring attention to the important issue of the government constraint on speech.

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