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Elon Musk and Tesla Model 3
Tesla Motors CEO Elon Musk talks about the Model 3 during its 2016 unveiling. (Credit: Tesla)

Tesla shares fell by as much as 6.5 percent today after Bloomberg News reported that the electric-car company was the subject of a criminal investigation by the Justice Department, focusing on CEO Elon Musk’s claims that he had secured the funding to take Tesla private.

The “funding secured” comment, posted on Twitter on Aug. 7, has also sparked increased scrutiny for civil action by the Securities and Exchange Commission.

Back then, Musk said he was considering a plan to buy up Tesla’s publicly traded shares at a premium price of $420, which boosted the stock price to around $380. But as time went on, the plan lost traction, and two weeks later Musk said the best course was to keep Tesla public.

Musk suggested that Saudi Arabia’s sovereign wealth fund would have supported the go-private plan, but Saudi sources kept mum. This week, the Saudi fund put $1 billion into Lucid Motors, an electric-car startup that’s seen as a challenger to Tesla.

Bloomberg quoted two unnamed sources as saying that federal prosecutors opened a fraud investigation focusing on Musk’s initial claims about funding. The criminal inquiry is still in its early stages, one of the sources was quoted as saying, and there’s no guarantee that charges will be brought.

The Securities Exchange Act prohibits publicly traded companies from announcing plans to buy or sell securities if executives don’t intend to follow through on the plans, don’t have the means to follow through, or are trying to manipulate stock prices.

A spokesman for the U.S. attorney’s office in San Francisco declined to comment, Bloomberg reported.

Tesla responded to the report in a statement emailed by a spokesman:

“Last month, following Elon’s announcement that he was considering taking the company private, Tesla received a voluntary request for documents from the DOJ and has been cooperative in responding to it. We have not received a subpoena, a request for testimony, or any other formal process. We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received.”

Tesla’s stock price fell to $275.50 in early trading today but recovered to close the trading day at just less than $285.

The company has been ramping up production of its Model 3 electric car, to such an extent that delivery issues are starting to pop up. When one customer complained about delivery delays on Twitter, Musk replied with tweeted regrets:

Tesla has had to deal with significant turnover in its executive ranks, including this month’s controversial departure of its chief accounting officer. It’s also facing encroachment by other automakers that are getting on the luxury electric-car bandwagon. Just this week, Audi unveiled its $75,000 e-tron SUV. Meanwhile, Jaguar is making a splash with its $70,000 all-electric I-Pace SUV.

Musk’s maverick image is another factor behind Tesla’s fortunes, for good and for ill: His outspokenness, technical acumen and geeky charm have attracted legions of dedicated fans and customers. His leadership of SpaceX and the Boring Company tunneling venture adds to the adulation.

However, Tesla’s shares suffered setbacks after Musk acknowledged in a New York Times interview that he was having “the most difficult and painful year of my career,” and after he was seen on a YouTube talk show taking a drag from a marijuana cigarette.

This week, British cave explorer Vernon Unsworth filed a federal lawsuit against Musk, claiming defamation and seeking damages for inflammatory comments that Musk made amid a dispute over this summer’s Thai cave rescue.

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