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The SEC filed its suit in the federal court in NY, and is based around Musk's Twitter Post on August 7 to his 22 million Twitter followers in which he said that "funding secured" to take Tesla private.

The SEC seeks to have Musk barred from serving as an executive or director of publicly traded companies and to impose a civil fine and other remedies.

The SEC lawsuit caused Tesla's stock to dip by as much as 11% in after-hours trading.

Representatives from Tesla and the SEC didn't immediately respond to requests for comment.

"Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders", said Steven Peikin, co-director of the SEC's enforcement division, in a statement.

The key point in the government's claim is that investors who bought Tesla stock as the price skyrocketed in the wake of his "funding secured" tweet in turn lost money when the truth came out-a situation that was engineered entirely by Musk, the SEC alleges. Losing its public face and guiding force would be a big blow for money-losing Tesla, which has a market value of more than $50 billion, chiefly because of investors' belief in Musk's leadership.

The fact that Elon Musk is being charged with fraud isn't exactly surprising to those that have been following the situation, however, the implications are absolutely massive for Tesla.

Tesla shares later plummeted as several executives quit following a webcast in which the CEO was filmed smoking marijuana and wielding a sword.

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Ford the professional environment she asked for", Grassley said. "I remember her saying the assailant was now a federal judge". According to the affidavits, Ford revealed the assault in varying levels of detail between 2002 and Koegler's email in June.

Grundfest said that whether Musk can stay on as CEO is "almost entirely up to Elon" and whether he is able to negotiate a settlement with the SEC.

His tweet on August 7 cost investors betting against Tesla about $1.3 billion, according to estimates from financial technology and analytics firm S3 Partners.

The lawsuit claims Musk's tweet "Am considering taking Tesla private at $420".

Musk tweeted that financing had been secured for a take-private deal and that the company had received broad investor support. 'I have always taken action in the best interests of truth, transparency and investors.

The SEC documents say the statements were false and misleading, and that Musk either knew that or was "reckless" in not knowing. "Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term". We reached out to Tesla, Elon Musk and the SEC for more information.

They claim: "Musk stated that he rounded up the price to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend would find it amusing". This purchase price reflected a premium over Tesla's stock share price at the time.

The SEC reaffirmed its commitment to holding individuals to account, adding: "Neither celebrity status nor reputation as a technological innovator provide exemption".