Technology

The securities fraud complaint filed by the U.S. Securities and Exchange Commission against Tesla CEO Elon Musk contains an eye-opening view into the events leading up to the &funding secured& tweet heard round the internet.

And luckily, TechCrunch has read through the document and highlighted the most compelling details, including new insights from the SECinvestigation.

But first, the nuts and bolts:The SEC filed a complaint Thursday in federal district court alleging that Musklied when he tweeted on August 7 that he had &funding secured& for a private takeover of the company at $420 per share. Federal securities regulators reportedly served Tesla with a subpoena just a week after the tweet. Investigations can take years before any action is taken, if at all.

In this case, the investigation, which regulators say is continuing, progressed to a complaint within six weeks.

The SEC alleges that Musk violated anti-fraud provisions of the federal securities laws. The commission has asked the court to fine Musk and bar the billionaire entrepreneur from serving as an officer or director of a public company. Thata big deal, and one Musk will certainly fight.

In a statement sent to TechCrunch, Musk described fraud charges an &unjustified action& that has left him &deeply saddened and disappointed.&

Here are some of the key takeaways and nuggets pulled from the complaint, which includes details of the SECinvestigation:

The fundinterest in Tesla

Musk met with representatives of a sovereign investment fund (Saudi Arabiasovereign wealth fund) three or four times beginning in January 2017. There was never a formal agreement, but the fund did express a&verbal desire& to make a big investment inTesla and establish a production facility in the Middle East, according to the complaint.

After months without contact, Musk met withthe fundlead representative on July 31. This is when he learns the fund has acquired almost 5 percent of Teslacommon stock.

According to the complaint, the representative expresses interest in taking Tesla private and asks about establishing a production facility in the Middle East. Musk said he was open to the idea, but did not make a commitment.

The representative did tell Musk that as long as the terms were &reasonable,& the fund would be fine with them. However, the pair never discussed specific deal terms during the meeting or talked about what would or would not be &reasonable.&Nothing was exchanged in writing, and there was no discussion of confidentiality, according to the complaint.

Musk did not communicate with representatives of the fund again about a going-private transaction until August 10, three days after his August 7 statements, the complaint states.

The Saudi sovereign wealth fund agreed in September to invest $1 billion into electric vehicle startup Lucid Motors.

The tweet was not some whim

Some have speculated that MuskAugust 7 tweet was just a silly impulse, particularly because the proposed shared price was a reference to marijuana. But regulators show in the complaint that Musk was talking to the board about an offer to take Tesla private as early as August 2 when he sent to Teslaboard of directors, chief financial officer and general counsel an email with the subject, &Offer to Take Tesla Private at $420.&

The email laid out his reasonsfor wanting to take Tesla private, including that being public &[s]ubjects Tesla to constant defamatory attacks by the short-selling community, resulting in great harm to our valuable brand,& according to the complaint.

The $420 share price

According to the complaint, Muskcalculated the $420 price per share based on a 20 percent premium over that dayclosing share price because he thought 20 percent was a &standard premium& in going-private transactions.

This calculation resulted in a price of $419. Musk stated that he rounded the price up to $420 because he had recently learned about the numbersignificance in marijuana culture and thought his girlfriend &would find it funny, which admittedly is not a great reason to pick a price,& according to the complaint.

A 50-50 chance

MuskAugust 7 tweet indicated that funding had been secured. The complaint lays out a much different account.

Musk thought that there was &a lot of uncertainty& regarding a potential going-private transaction at the time of his August 2 email to Teslaboard, &but it was worth investigating,& according to the complaint.

He believed at the time that the likelihood of consummation of a transaction was about 50 percent, the complaint says.

Permission granted, request ignored

Musk had a call with the board on August 3, the day after he sent the email. He told the board he wanted tocontact existing shareholders to assess their interest in participating in a going-private transaction, the complaint said.

The board authorized him to contact certain investors and report back on those conversations.

Musk never spoke to any shareholders. He had a conversation with a private equity fund representative about the process, according to the complaint. But he didn&t contact anyadditional potential strategic investors to assess their interest.

He also did not provide the board with a specific proposal, contact existing shareholders to determine if they would remain invested in Tesla as a private company, retain any advisers or determine whether retail investors could remain invested in Tesla as a private company.

Four days after the call he sent the tweet.

An unprecedented transaction structure

During his conversation with a private equity fund partner, who had previous experience with such transactions, Musk said the number of Tesla shareholders needed to be below 300, according to the complaint.

But herethe problem. Tesla had more than 800institutional shareholders and many more individual shareholders at the time.

The private equity fund partner said the transaction structure that Musk was contemplating was &unprecedented& in his experience, according to the complaint.

Is it legit

MuskAugust 7 tweet triggered a maelstrom of calls, emails and texts from the board, executive staff, analysts and press. Confusion was the theme early on.

In one example, Teslahead of investor relations, Martin Viecha, sent a text to Muskchief of staff (Sam Teller) about 12 minutes after the initial tweet asking &Was this text legit&

Teller and Viecha would receive more communications from press and shareholders. One reporter emailed Musk asking &Are you just messing around& The reporter wrote, &Reaching out to see whatgoing on with your tweets about taking the company private Is this just a 420 joke gone awry&

Senator Mark Warner (D-VA) has issued a stern reprimand to Facebook over todayrevelation that 50 million users had their access token stolen by a hacker. &This is another sobering indicator that Congress needs to step up and take action to protect the privacy and security of social media users& Warner writes. As I&ve said before & the era of the Wild West in social media is over.&

In July, Warner published an expansive policy paper outlining where he believes regulation is necessary for social media companies. He proposes that companies holding large data sets be regulated as &information fiduciaries& with additional consequences for improper security. He suggests requirements for data portability and interoperability that would allow users to export their personal information and use it elsewhere if they were unsatisfied with their treatment by a social media giant. He also recommends applying similar rules in the US to EuropeGDPR including a requirement that breaches be disclosed within 72 hours of discovery. Notably, Facebook did disclose this hack within that window.

[Update: FTC Commisioner Rohit Chopra has now tweeted that &I want answers& regarding the Facebook hack, further strengthening the possibility that todayproblem will trigger more calls for regulation.] CEO Mark Zuckerberg wrote today that &While I&m glad we found this, fixed the vulnerability, and secured the accounts that may be at risk, the reality is we need to continue developing new tools to prevent this from happening in the first place.&

Facebook &View As& tool has been disabled following the hack. It let users see how their profile looked to a certain other user

The breach saw sophisticated hackers combine three Facebook bugs in its video uploader, user profile, and &view as& privacy feature to generate and steal the access tokens that allow users to stay logged into Facebook between sessions. These could be potentially used to take over user accounts. Facebook says thereno evidence that hackers accessed users& private messages or posted on their behalf. However, CEO Mark Zuckerberg confirmed on a call with reporters that before Facebook fixed the issue last night, hackers did try to query the Facebook API for users& names, hometowns, genders, and possibly more.

Facebook has reset the access tokens of the 50 million users impacted plus another 40 million who&d had their accounts viewed through the &view as& tool this year. That means they&ll have to log back into Facebook but won&t need to change their password.

The bugs stem from code pushed back in July, but Facebook only discovered the issue Tuesday afternoon as the hackers tried to scale up the attack to steal more tokens. Facebook patched the issue last night and this morning announced it was investigating, though it currently doesn&t have enough information to determine the source of the attack. Italready notifed the FBI, as well as the Irish Data Protection office since the breach has GDPR implications.

On a call with reporters, CEO Mark Zuckerberg repeatedly called the problem &serious&. But beyond recounting the steps Facebook is taking to address this breach, he didn&t have a good answer for why users should still trust Facebook with their data.

Always quick to pounce on privacy issues, Warner has become one of the strongeest Democratic critics of the social network. Heseemingly inherited the position of tech watchdog from former-Senator Al Franken. Heweighed in on recent social media bias and election interference, Googleplan to launch censored search in China, White House cybersecurity plans and more. With technology becoming an ever more important and dangerous part of peoplelives, Warner seems to see an opportunity to both protect his constituents and advance his career by demonstrating his expertise and ferocity.

This hack could be by Warner as strong evidence that social media companies like Facebook are not voluntarily doing enough to protect uses& security and privacy. If regulation around security, portability, and interoperability is enacted, it could cost Facebook money for compliance, slow dow the pace of engineering innovation at the company, and make it more vulnerable to competitors.

Zuckerberg has countered that regulation could actually protect Facebook from disruption by making it tougher for new social networks to build up the data treasure trove it has. He also believes regulation could slow down US tech companies, thereby giving Chinese alternatives an advatange as they battle for international markets like India and Brazil.

Right now, ittough for users to easily switch from Facebook to another social network, which insulates Facebook from its PR problems becoming user growth problems. But if ditching Facebook for a competitor becomes simpler, it might force the company to treat its users better.

The Senator Mark Warnerfull statement can be found below:

STATEMENT OF U.S. SEN. MARK R. WARNER

~ OnFacebook hack~

WASHINGTON & U.S. Sen. Mark R. Warner (D-VA), Vice Chairman of the Senate Select Committee on Intelligence and co-chair of the Senate Cybersecurity Caucus, released the following statement on the announcement by Facebook that it discovered a security issue affecting almost 50 million accounts:

&The news that at least 50 million Facebook users had their accounts compromised is deeply concerning. A full investigation should be swiftly conducted and made public so that we can understand more about what happened.

&Todaydisclosure is a reminder about the dangers posed when a small number of companies like Facebook or the credit bureau Equifax are able to accumulate so much personal data about individual Americans without adequate security measures.

&This is another sobering indicator that Congress needs to step up and take action to protect the privacy and security of social media users. As I&ve said before & the era of the Wild West in social media is over.&

To kick start the debate around social media legislation, Sen. Warner in July releaseda white papercontaining a suite of potential policy proposals for the regulation of social media.

Remember phone reveals Once upon a time, companies were able to save a little for the event. These days, however, we nearly always know exactly what we&re getting ourselves into. Due to be announced next month, the second iteration of Razergaming-centric handset is no different.

Bits and pieces of the forthcoming phone have already surfaced, but todaylatest leaks give us the clearest picture thus far. From an aesthetic standpoint, not a lot has changed. From the front, the new Razer Phone 2 looks virtually identical to last yearmodel, retaining the boxy design.

The back of the handset has been tweaked a bit, with a shifted logo, now in a neon green, in keeping with the rest of Razerproducts. The company appears to have borrowed the Chroma lighting effects here, meaning that the logo should light up when in use. The rear-facing camera has shifted down a bit, as well.

Beyond this, we don&t know a ton about the phone — but have no fear, therestill time. The handset is set for an official launch on October 10, which leaves us with a week and a half left to leak.