Tesla shareholders who claimed to face financial losses after CEO Elon Musk tweeted about taking the company private might be on the verge of receiving compensation from a $42.3 million fund established as part of Musk’s federal securities fraud settlement.
The United States Securities and Exchange Commission said 3,350 eligible claimants will share in the payout, recouping almost 52% of their losses, according to a Wednesday night court filing in the Southern District of New York Court.
The compensation to investors comes several months after Musk was found not liable in a class-action securities fraud trial that explored how the CEO’s now infamous “funding secured” tweet caused volatility in the stock, resulting in losses of money. If Musk had lost the trial, he’d have paid out billions of dollars in damages to investors.
The fund comes from a 2018 settlement with the SEC over the tweet. After the SEC filed a complaint alleging Musk lied when he tweeted he had secured funding for a private takeover of the company at $420 per share, Musk agreed to step down as chairman of Tesla and pay a $20 million fine. Tesla agreed to pay a separate $20 million penalty. The total amount grew to $42.3 million with interest payments.
U.S. District Judge Lewis Liman in Manhattan said Thursday he hopes to approve the payouts by September 1 or shortly afterward.
The SEC settlement also included a stipulation that Musk agree to let a Tesla lawyer approve some of his Twitter posts. Musk has sought to scrap that decree, calling it a “muzzle” on his right to free speech. In May, Judge Liman, who oversees the case, denied the motion to end the decree.
Musk is expected to appeal that decision to the U.S. Supreme Court.