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Manhattan federal prosecutors and the Securities and Exchange Commission are separately probing the use of Tesla funds to finance a secret project that is being described internally as a glass house for CEO Elon Musk, according to a Wall Street Journal report. has been described in Case.
The WSJ reported in July that Tesla board members were investigating a possible misappropriation of company resources on a project dubbed “Project 42” and whether Musk was personally involved. According to the newspaper, Project 42 is a large glass structure to be built in Austin, Texas.
The US Attorney’s Office for the Southern District of New York has reportedly sought information on what benefits Musk has been given, how much Tesla spent on the project and what the project was for, WSJ sources said. The SEC, which sources say is seeking similar information, has launched a civil investigation into Project 42.
TechCrunch could not confirm the investigation with the SDNY or the SEC, and Tesla could not be reached for comment.
The SEC requires public companies to disclose transactions over $120,000 in which a related party has a material interest. The agency also requires that any benefits paid to senior executives in excess of $10,000 in value be disclosed to investors.
The cost of Project 42 could not be ascertained, but the glass building was to be built near Tesla’s Austin headquarters.
Musk and Tesla have invested heavily in Texas in recent years. In addition to visiting the state in person, Musk announced his decision to move Tesla headquarters from Palo Alto, California to Austin in October 2021 after a series of struggles with California’s “overregulation, overlitigation, overtaxation”. Texas doesn’t tax personal income or capital gains, a real draw for the world’s richest man.
Tesla also celebrated the opening of its Austin Gigafactory in April 2022 with a so-called “cyber rodeo”. Earlier this year, Tesla said it had more than tripled its Gigafactory workforce in Austin.
Tesla is facing separate investigations from the Justice Department and the SEC over the automaker’s bold claims regarding the capabilities of Autopilot, Tesla’s advanced driver assistance system.
The EV maker has had a difficult history with the SEC. The agency launched an investigation into Tesla after Musk tweeted in 2018 that he had “funding secured” to take Tesla private (he did not), which allegedly caused volatility in the stock price. As part of the settlement with the SEC, both Tesla and Musk separately paid $20 million in fines, and Musk agreed to have a lawyer review his tweets. Musk has since been trying to get the condition dismissed, which he has called a “muzzle” on the right to free speech.
In August, the SEC said investors who suffered financial losses as a result of the tweets may soon receive payments from a $42.3 million fund set up as part of a securities fraud settlement.
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