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Image: Elon Musk
Tesla CEO Elon Musk says he’s “deeply saddened” by the claims against him. (Tesla via YouTube)

Tesla’s billionaire CEO and chairman, Elon Musk, is calling the Securities and Exchange Commission’s fraud claims against him “unjustified” after reportedly passing up a settlement deal that would have temporarily forced him from a leadership post.

“This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk said Thursday in a statement distributed after the SEC filed its civil complaint. “I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

The no-compromise stance suggests that the legal case over Musk’s considered-but-discarded plan to take Tesla private won’t be resolved quickly. The prospect of having the fraud charges and Musk’s potential departure hanging over Tesla led to an immediate 12 percent drop in the company’s share prices today. Tesla stock finished the trading day down 13.9 percent from the previous day’s close, at $264.77.

Looking ahead, there’s a chance that Musk and other Tesla executives could face further legal action, potentially including criminal charges.

After the SEC filed its complaint, Tesla and its board of directors issued a statement voicing confidence in Musk’s “integrity and leadership.”

“Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees,” they said.

Musk and Tesla’s many fans had been hoping that a strong quarterly report on Model 3 electric-car deliveries, and the resulting profit, would trump the controversy over Musk’s go-private play in August.

The key claims came in a series of Aug. 7 tweets from Musk, saying that billions of dollars in funding had been secured for a plan that would buy back Tesla’s shares at a premium price of $420. Only the shareholders’ assent was needed, he said.

As the month went on, the story changed: Musk said that there had been discussions with potential Saudi backers, but they didn’t go ahead with a firm, contingency-free commitment to funding. There were also legal snags that would have stymied Musk’s hoped-for plan to let thousand of individual investors hang onto their stock if they so chose.

In the end, Musk decided it was best for Tesla to stay public and focus on executing its plans for the Model 3 and other electric vehicles. But the resulting back and forth caused stock prices to whipsaw between the $380s and the $260s.

The SEC alleges that Musk “knew that the potential transaction was uncertain and subject to numerous contingencies,” and noted that his tweets about the matter led to “significant market disruption.”

In its complaint, the SEC is seeking a court-mandated bar prohibiting Musk from serving as an officer or director of a public company.

CNBC reported that the SEC had been working on a settlement with Musk, in which he’d admit no guilt but agree to pay a fine and step down from his post as chairman for two years. The deal reportedly would have also required Tesla to add two independent directors to its board.

According to reports from CNBC and The Wall Street Journal, based on interviews with unnamed sources, Musk rejected the deal on Thursday, leading the SEC to file its complaint.

Update for 3 p.m. PT Sept. 29: After today’s market close, Musk issued a series of tweets that focused on the ramp-up of Model 3 deliveries rather than legal issues. There was a subtweet, however, pointing to the “DON’T PANIC” sign in the Tesla Roadster that was launched into space by SpaceX’s Falcon Heavy rocket in February. The sign refers to humorist Douglas Adams’ classic “Hitchhiker’s Guide to the Galaxy,” but it could refer as well to the state of mind sought by Musk and his fans.

Here’s the exchange:

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