The US Securities and Exchange Commission has formally accused Elon Musk of misleading investors when he tweeted that he had funding lined up to take Tesla private at $420 a share. The SEC intends not only to impose a fine, but also seeks to bar Musk from serving as officer or director of a public company.

The agency says that Musk’s claim in his August tweet that he had “funding secured” was false.  “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC says in its complaint.

“Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,” the SEC said. “He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required. Musk’s false and misleading statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”

The cute reefer reference (420) was suggested by Musk’s girlfriend, Canadian singer and songwriter Grimes, according to the agency.

“It’s unusual for a case of this significance to move this quickly, in particular when you’ve got a high-profile individual,” said former SEC attorney Robert Long. However, the agency “could have conducted its investigation quickly” because it was focused on only a few fateful tweets.

In addition to the SEC suit, Bloomberg reported that the Justice Department is also looking into whether Musk misled investors.

The stock market was expecting the SEC suit, but apparently not the drastic demand that Musk step down as CEO of Tesla – TSLA stock retreated from its recent rally, and then some, in after-hours trading.

The Wall Street Journal reported that the SEC drafted a settlement with Musk that was approved by the agency’s commissioners, but Musk’s lawyers call to pull out on Thursday morning.

“This unjustified action by the SEC leaves me deeply saddened and disappointed,” said Musk. “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.”

Source: Bloomberg, Wall Street Journal