Tesla CEO Elon Musk and his brother Kimbal Musk are under investigation by the Securities and Exchange Commission (SEC) for possible insider trading. The SEC began investigating the Musk brothers after Kimbal Musk sold 88,500 shares of Tesla for $108 million in November 2021, according to The Wall Street Journal. Kimbal Musk took the decision just a day before Elon Musk asked his followers if he should sell 10% of Tesla shares in a Twitter poll.
Elon Musk wrote in a Tweet, “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.” He further asked his followers if they support his decision and told them to respond in a yes or no and further mentioned that he will abide by the result of the poll. In the poll, 57.9% of people supported his decision while 42.1% voted “no”. Musk framed the potential sale of his shares as a means to pay taxes. Reportedly, Kimbal Musk sold 88,500 shares one day before his brother Elon Musk tweeted the poll. The sale of stocks has prompted the investigators to question whether Elon Musk told his brother about the timing of his sales before Kimbal Musk sold his shares on November 5.
Elon Musk’ Brother Kimbal Musk sold 88,500 shares of Tesla
Kimbal serves on the boards of directors of Elon Musk’s Tesla and SpaceX, but his main business is in the restaurant industry. Kimbal Musk may have violated restrictions that prohibit employees and board members from trading nonpublic information, The Wall Street Journal reported. Kimbal Musk has avoided any consequences for insider trading by using 10b5-1 so far, according to the security filings. The 10b5-1 plan allows people in the stock market to sell a predetermined number of shares at a predetermined time.
SEC issues subpoena seeking information
Kimbal Musk has made over 40 sales under the 10b5-1 plan since 2011, according to regulatory filings. The Security and Exchange Commission has not received any information regarding Kimbal Musk’s sales made using 10b5-1 in November. Elon Musk’s Twitter poll lasted for 10 days before the SEC issued a subpoena seeking information related to financial data. In a letter last week, Tesla’s lawyer insisted that the SEC was harassing Elon Musk and his company by launching the investigation.