Manhattan federal prosecutors and the Securities and Exchange Commission are separately investigating the use of Tesla funds to bankroll a secret project that is described internally as a glass house for CEO Elon Musk, according to a report from the Wall Street Journal that cites people familiar with the matter.
WSJ reported in July that Tesla board members were investigating potential misuse of company resources on the project, known as “Project 42,” and whether Musk was personally involved. According to the newspaper, Project 42 involves a large glass structure to be built in Austin, Texas.
The U.S. Attorney’s Office for the Souther District of New York has reportedly sought information about what benefits have been paid to Musk, how much Tesla spent on the project, and what the project was for, WSJ’s sources said. The SEC, which sources say is seeking similar information, has opened a civil investigation into Project 42.
TechCrunch could not confirm the investigations with the SDNY or the SEC, and Tesla could not be reached to comment.
The SEC requires public companies to disclose transactions above $120,000 in which a related party has a material interest. The agency also requires any perks worth more than $10,000 paid to senior executive officers be disclosed to investors.
The cost of Project 42 could not be learned, but the glass building was to be built near Tesla’s Austin headquarters.
Musk and Tesla have invested heavily in Texas in recent years. Aside from personally moving to the state, Musk announced his decision to relocate Tesla headquarters from Palo Alto, California to Austin in October 2021 after a series of clashes with California’s “overregulation, overlitigation, overtaxation.” Texas doesn’t tax individual income or capital gains, a true draw for the world’s richest person.
The EV maker has a fraught history with the SEC. The agency opened an investigation into Tesla after Musk tweeted in 2018 that he had “funding secured” to take Tesla private (he didn’t), allegedly causing volatility in the share price. As part of a settlement with the SEC, Tesla and Musk both paid separate $20 million penalties, and Musk agreed to have a lawyer review his tweets. Musk has been trying to throw out the stipulation ever since, which he has referred to as a “muzzle” on his right to free speech.
In August, the SEC said investors who suffered financial losses as a result of the tweet might soon receive a payout from a $42.3 million fund established as part of the securities fraud settlement.
Manhattan federal prosecutors and the Securities and Exchange Commission (SEC) are reportedly conducting separate investigations into the use of Tesla funds for a secret project known as “Project 42.” According to a report from the Wall Street Journal, the project involves the construction of a large glass structure in Austin, Texas, described internally as a glass house for CEO Elon Musk. Tesla board members had previously initiated an investigation into potential misuse of company resources for the project and whether Musk was personally involved. The U.S. Attorney’s Office for the Southern District of New York has sought information regarding the benefits paid to Musk, the project’s cost, and its purpose. The SEC has also opened a civil investigation into Project 42. Tesla has not provided any comment on the investigations. The SEC requires public companies to disclose transactions above $120,000 involving related parties and perks worth over $10,000 paid to senior executive officers. The cost of Project 42 remains undisclosed, but it was intended to be built near Tesla’s Austin headquarters. Tesla and Musk have been heavily investing in Texas, with Musk relocating the company’s headquarters from California to Austin in 2021. Tesla is also facing separate investigations from the Department of Justice and the SEC regarding its claims about the capabilities of its Autopilot system. In 2018, the SEC investigated Musk after he tweeted about having “funding secured” to take Tesla private, resulting in share price volatility. Musk and Tesla paid separate $20 million penalties as part of a settlement, and Musk agreed to have his tweets reviewed by a lawyer. Musk has been attempting to challenge the settlement, referring to it as a limitation on his right to free speech. In August, the SEC announced that investors who suffered financial losses due to Musk’s tweet might receive a payout from a $42.3 million fund established as part of the securities fraud settlement.