The complaint comes two days before a pivotal vote by Tesla shareholders on whether to reinstate Musk’s US$56 billion (S$75.8 billion) compensation package, which was annulled in January by a Delaware court who determined that Musk had illegally controlled the process.
According to the lawsuit filed by the Employees’ Retirement System of Rhode Island (ERSRI), Musk and his brother, Kimbal Musk, a Tesla director, sold a combined US$30 billion in the electric vehicle maker’s stock between late 2021 and the end of 2022, cashing in before news of the stock’s decline became public.
According to the case filed in Delaware Chancery Court, Musk sold the shares at fraudulently inflated prices while hiding his plan to utilize the profits to acquire social media company Twitter, which he eventually renamed X. Musk also traded Tesla stock after learning that Tesla car deliveries had fallen considerably short of public expectations, according to the lawsuit.
Musk and Tesla did not reply to mails requesting comment.
ERSRI owns around 140,000 shares of Tesla. Tesla’s shares ended at $170.66 on June 11, valuing the investment at almost $24 million.
A second action filed in the same court late in May by Michael Perry, another Tesla shareholder, accused Musk of insider trading when he sold more than US$7.5 billion in Tesla stock in late 2022.
Musk is currently the subject of a regulatory investigation to investigate if he violated federal securities laws when he purchased Twitter stock in 2022.
ERSRI’s June 11 complaint also claimed that Musk had been unfaithful to Tesla in a number of ways, including directing Tesla staff to work at X and forcing Tesla to begin paying for advertising on Twitter after he purchased the platform.
ERSRI’s general treasurer expressed worry that Tesla’s board of directors was not doing enough to supervise Musk’s conflicts of interest.
