Federal Judge Requests Musk, SEC To Submit Letter To Justify Settlement

(RTTNews) - A federal judge has reportedly asked Tesla Inc. (TSLA) CEO Elon Musk and the US Securities and Exchange Commission to submit a joint letter justifying their settlement agreement.

Judge Alison Nathan, a US District Court judge in New York, requested a joint letter explaining why she should approve the tentative settlement deal between Musk and the SEC. The judge asked for the letter to be submitted before October 11 and not to exceed 10 pages.

According to CNBC, Nathan said the court needs to make a "minimal determination of whether the agreement is appropriate" before she would sign off on the deal.

She added that the law requires her to determine whether the enforcement action is "fair and reasonable, with the additional requirement that the public interest not be disserved."

It's not uncommon for a judge to ask for a letter.

Last week, Musk and SEC reached a settlement on the "taking private" claim. The billionaire entrepreneur agreed to step down as the luxury electric car maker's chairman and pay $40 million in penalties.

The SEC had earlier charged Musk with fraud for a series of false and misleading tweets about a potential transaction to take Tesla private.

Musk has been in trouble since August 7, when he tweeted that would be taking Tesla private at $420 a share and had secured funding from a Saudi Arabia fund. The tweet boosted the company's stock price.

However, SEC alleged that Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had also not discussed specific deal terms, including price, with any potential financing partners and his statements about the possible transaction lacked an adequate basis.

Meanwhile, the judge is not required to accept the proposed settlement deal.