Elon Musk accuses the SEC of illegally leaking details of its Tesla investigation - CNN

New York (CNN Business)Tesla CEO Elon Musk is escalating his battle with the Securities and Exchange Commission, accusing a staff member of illegally leaking the results of an investigation. Musk said the regulator is trying to "weaponize" an earlier consent decree he and Tesla signed "for illicit ends."

The allegations in a court filing did not disclose the contents of the alleged leak, the name of the staff member who is alleged to have leaked the information or where it was reported. Most of the reporting on Musk's battles with the agency for the last week have been based on court filings that are part of the public record.

But this latest missive from Musk's lawyers disclosed that it has sent a letter to the agency's Inspector General requesting an investigation of the agency's conduct in its probes of Tesla and Musk. Musk's attorneys demanded SEC staff "preserve their records and devices."

The SEC declined to comment on this latest letter from Musk and his lawyers.

Musk has criticized the SEC for years, tweeting that it is the "Shortseller Enrichment Commission." Last week Musk's lawyers wrote to US Judge Alison Nathan of the Southern District of New York arguing that the SEC was continuing to target Musk because he "remains an outspoken critic of the government," and that the ongoing investigations of his public comments constitute an "outsized effort" to "chill his exercise of First Amendment rights."

On Friday the agency, which serves as a watchdog for investors, responded with its own letter to the judge claiming it had done nothing improper. That prompted the latest response from Musk's lawyer Monday.

A controversial agreement

Nathan oversees a consent decree reached in 2018 between the agency, Musk and Tesla. It came after an SEC probe of Musk's tweet that he had "funding secured" to take Tesla private. News of that plan had sent Tesla shares soaring, but It later became clear that funding was by no means secured.

As part of the consent decree, Musk gave up his role as Tesla's chairman, although he remains CEO. He agreed to have any of his future social media posts that might contain material information about the company reviewed by other executives at Tesla before sending them. He and Tesla each paid a $20 million fine as well, with Musk compensating the company for its payment by purchasing an additional $20 million in Tesla stock.

Musk's lawyers letters last week and again on Monday complained about the fact that the SEC had not distributed those funds to Tesla shareholders. The SEC in its Friday letter said the distribution was a complex matter and that it expected it would have a final distribution plan ready for court approval by the end of March.

An active investigation

Musk hasn't been shy about tweeting since the 2018 consent decree was reached and it is not clear exactly how much outside supervision his tweets get at Tesla, despite the settlement.

What is clear is that the SEC has continued to monitor his activity, and isn't happy about everything it sees.

Earlier this month Tesla's annual financial filing disclosed that the company has received a subpoena from the SEC "seeking information on our governance processes around compliance with the SEC settlement."

That subpoena came days after Musk conducted a November Twitter poll asking if he should sell 10% of his shares and pledging to do so if a majority of respondents agreed, which they did. Shares of Tesla (TSLA) fell on the first trading day after the poll.

As Musk started selling his shares later in November, it became clear that most of the sales were being done in order to pay the taxes he faced on exercising soon-to-expire stock options, and not as a result the Twitter poll. Because of that exercise of options, he ended up owning more shares of Tesla at the end of the year than he did when he posted the poll.

The company also disclosed in its filng that the SEC issued a subpoena to Tesla in December seeking "certain financial data and contracts including Tesla's regular financial arrangements." But Tesla said that the agency later notified the company that investigation had concluded.

In its Friday response to Musk's earlier letter the agency said it had "not issued any subpoenas in this litigation," suggesting that the subpoenas disclosed by Tesla had been part of new investigations by the agency.

Musk's Monday letter called this claim by the SEC "disingenuous at best."

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