The Department of Justice is looking into whether Tesla committed securities and wire fraud around its self-driving vehicle claims, Reuters reports today, citing three sources familiar with the matter.
2024-05-0814:26172168www.theverge.com
Elon Musk has promised fully autonomous vehicles for years.
The investigation, which was first reported in October 2022 but has been going on since at least late 2021, involves federal prosecutors in Washington and San Francisco who are examining whether Tesla executives misled consumers, investors, and regulators by making unsupported claims about its autonomous capabilities. Now, it appears that investigators are zeroing in on specific charges against the company: securities and wire fraud.
According to Reuters, the probe is looking into statements made by Tesla CEO Elon Musk in particular. For years, Musk has been promising fully autonomous Tesla vehicles are just around the corner — while also admitting that he often sets overly optimistic timelines. Meanwhile, the company’s advanced driver-assist features, Autopilot and Full Self-Driving, do not make the vehicles autonomous and require drivers to keep their hands on the steering wheel and eyes on the road.
According to Reuters, the probe is looking into Tesla CEO Elon Musk’s claims in particular
Tesla has repeatedly pushed the boundaries of safety by allowing its customers to beta test products that may not be ready for wide release. Tesla vehicles using Autopilot have been subject to numerous recalls and involved in hundreds of crashes over the years, dozens of which have been fatal. The most recent recall, which applied to every single Tesla sold to date, has now come under a new investigation for its failure to prevent driver misuse and correct the flaws identified in the first recall.
Wire fraud involves deceiving customers in interstate communications, whereas securities fraud relates to misleading investors. The Securities and Exchange Commission is also looking into whether Tesla lied in its communications about self-driving vehicles, Reuters says.
The Justice Department is said to also be looking into Tesla’s vehicle range claims. Tesla customers have long complained that the company’s listed vehicle ranges often don’t match up to the reality of what the cars are capable of.
In its latest securities filing, Tesla acknowledged “regularly” receiving subpoenas and requests for information from the SEC and Justice Department, some of which involve Autopilot and Full Self-Driving.
“To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” the company said.
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Comments
Absolutely. If Martha Stewart went to jail for much less, a certain CEO[1] should be doing some hard time for ludicrous claims over the past 8 years. Some back-of-the-napkin-math: If we focus on the 4m Model 3 (& Y) vehicles sold that had these claims attached and assume that there was a peak uptake rate of 46% declining to 11% as these claims became obviously untrue. On FSD @ an ever-increasing price of $6000-$12000 USD per vehicle. Let's say take the declining rate difference as indicative of the group that was misled. 35% of those taking FSD took the feature because of erroneous claims, generating about 2Bn in high-margin revenue collected pumping the stock and causing investors to pile on creating even more validation of this claim. Pumping the stock also created massive tranche payouts for Musk for hitting certain valuations that should only have been hit when the automaker was truly a runaway success. Musk is incentivized to use this reality-distortion field & cult-like persona to continue lying about Tesla's future for personal and corporate gain.
[1] Edit: Founder -> CEO
We all need to remember Musk wasn't the founder. He was an early investor that forced the founders out. We can argue about whether the founders would have been more/less successful but he didn't found Tesla.
[https://www.theverge.com/23815634/tesla-elon-musk-origin-fou...]
Elon "take-n-tank" Musk the brand destroyer lol
I have an even funnier one for you: That viral video of when he was bald and bought that very expensive McLaren... "It's the highlight of my life" he said shortly before totaling the car with no insurance.
"He's a genius!"
This could have been avoided just by calling it "Partial Self Driving" and then everything would be above board.
By dawnerd 2024-05-0815:23 That’s only part of the problem. They’re specifically investigating claims Elon made himself where he said the car drove itself without human input. He’s repeatedly made claims like this.
It's advanced cruise control, basically, and if advertised as such it'd be great.
By mensetmanusman 2024-05-0815:251 reply That’s what they call it in the aerospace industry /s
By _akhe 2024-05-0815:18 I agree 100% he should be prosecuted at this point. He should have been the first time.
By throwtappedmac 2024-05-0815:363 reply I think Martha Stewart went to jail for insider trading idk how similar that is. With OTA updates still could claim this could happen.
This imo is less than both Theranos and insider trading like the FSD has disclaimers right? Unless the argument is Tesla is only valuable because of FSD and not best in class EV experience
The pay package being declined by a Delaware court and now this couldnt have come at a worse time for Musk though. Billionaires got their problems too huh
By dragonwriter 2024-05-0815:561 reply > Unless the argument is Tesla is only valuable because of FSD
That's not how fraud works. Fraud doesn't require that the false claim us the only source of value of the product, it only requires that the false claim is material to the decision to purchase the product at the price offered.
By FireBeyond 2024-05-0815:43 > Unless the argument is Tesla is only valuable because of FSD
Not specifically that, but Musk has stated that he sees Tesla as a software company.
By JumpCrisscross 2024-05-0815:421 reply > Martha Stewart went to jail for insider trading
"Stewart was found guilty on charges including conspiracy and obstruction of justice" [1]. She sold shares on inside information. She went to jail for lying to investigators about it.
[1] https://people.com/martha-stewart-fraud-case-prison-sentence...
By itsoktocry 2024-05-0815:239 reply >A certain founder should be doing some hard time for ludicrous claims over the past 8 years.
I don't think "hard time" is appropriate for white collar crimes. Money is how you speak to these people. Martha Stewart is still worth hundreds of millions of dollars.
By LeifCarrotson 2024-05-0815:311 reply Hard time costs humans the same amount whether they're rich or poor - insofar as the justice system is equally accessible and you can't just lawyer your way out if wealthy or get screwed by a disinterested public defender if poor, of course.
Money is amoral. It quickly becomes a calculation of ROI to violate the law. We've been reluctant for some reason to index fines against the wealth of the offender, but what would be a ruinous fine for a poor person is irrelevant to a wealthy person (eg. $1000 gag order violations). Also, the wheels of justice turn inexorably but slowly, and if first-to-market matters a lot with new there may be no fine that could restore things to the way it should have been if everyone acted within the law.
Strongly disagree with both claims. Fraud of a sufficient degree causes harm at a scale that is equivalent (in economic terms at least) to the consequences of murder. And jail time absolutely speaks to wealthy people, given the amount of money and effort wealthy people will spend defending themselves to avoid it.
What’s money when you have billions? Isn’t jail worse then? I’d be prepared to pay a very large amount if it meant I could avoid going to jail. There is a much much much smaller amount (if any) of jail I’d accept in return for money.
By bee_rider 2024-05-0815:47 If someone steals something, taking the thing they stole back is of course the first step.
Other than that, the next step depends on what you think the point of the court/prison system is. If the point of the system is to prevent criminals from harming people: white collar criminals do crime at scale. They can hurt many more people than blue collar criminals.
If the point is to reform people, it seems like white collar criminals have an easier time lying to themselves and justifying their actions, because they don’t physically take things from people, it’s all very abstract. So that seems like a harder project that might take longer.
If the point is to prevent others from following their example, there are lots of reasons to punish white collar criminals more harshly. Their crimes are more difficult to work out, so getting caught might be harder. Plus there’s less of a de-facto preventative aspect—with blue collar crimes, depending on the crime, there’s likely a chance the victim might be physically present and quite irate, so they might fight, potentially even kill, the culprit.
Of course there are some reasons that blue collar crimes can be more serious (muggers might physically hurt somebody). But I don’t think hard time is inappropriate in either case.
By Zigurd 2024-05-0815:30 The size of white collar crimes, measured in financial damage, and the large number of victims of many white collar crimes, not to mention the damage to the economy, institutional reputation, etc. makes a car theft ring that would get 10 years look like piffle.
By api 2024-05-0815:28 Force those responsible to eat the cost of providing partial refunds to people who bought full self drive based on false claims.
I'm not sure Martha Stewart actually did "hard time" - she spent what, a few months in jail? Try 10-20 years.
I'm also not arguing for against jail time for white collar crimes, just disputing that she specifically did hard time. Maybe the FTX guy or Enron guys are more appropriate for a comparison.
The issue is the fines aren't a big deterrence as they're not that big. A lot of fines are less than the money the company made or saved with the illicit activity so it just becomes a line item cost more than an actual penalty.
By philosopher1234 2024-05-0815:281 reply Hard time seems much more severe than fines and penalties, and the damages caused are much more severe than petty theft (which gets you jail time.) it seems totally appropriate to jail these people to me.
This is about defrauding people who bought a tesla, not investors.
> In 2020, Musk told a crowd in Shanghai that he remains “confident” that Tesla will achieve “basic functionality for level five autonomy this year,” referring to the SAE’s rankings of autonomy. Tesla’s technology, in 2024, is still at level 2.
This reminds me alot of the Thernos case where she tried to make the case not about fraud but about an overly optimistic CEO promising something and being wrong about that. here Musk has clearly said that full self driving would be available many years ago.
So I guess we're trying to figure out how much lying is ok by a CEO before it becomes fraud to the buyer.
I purchased FSD in 2019 on the promise of self driving. 5 years later and still no self driving. There was also the promise of the car being able to self park. I would be happy if I got my money back for a feature that was never delivered.
I couldn't imagine paying $12,000 for technology that didn't exist, from someone who repeatedly lied about that technology existing.
By steelframe 2024-05-0815:261 reply As my grandfather used to put it, you paid some "tuition of life" for a lesson you'll (hopefully) not soon forget.
same. at least we got in before the price jumped? We don't even have a hope as the new MCU doesn't even support getting backported to our car even if we were willing to pay for it.
By bunderbunder 2024-05-0815:031 reply As the article explains, wire fraud is about defrauding consumers, and securities fraud is about deceiving investors. Tesla is under investigation for both.
Wire fraud is nowadays just a catch-all for "crime involving money". Regardless of all other specifics of the case, it is a certainty that at some point someone sent a text message or used a computer, so that's what the feds will go after.
Ran a scammy crypto exchange out of the Bahamas? Took money from investors for a failed blood testing company? Raised money for a political campaign but spent it on hookers? Paid a hitman to kill your spouse? All wire fraud.
By FireBeyond 2024-05-0815:471 reply > This reminds me alot of the Thernos case where she tried to make the case not about fraud but about an overly optimistic CEO promising something and being wrong about that.
Right, and that fell apart with, well, many things, but the one that stands out to me - upcoming FDA inspection, and Holmes (in something out of a cartoon) literally had someone put a filing cabinet in front of the door to the lab where they were doing actual work to hide it, and direct inspectors to a faked up lab, i.e. outright fraud and deception.
By rsynnott 2024-05-0817:55 She wasn't convicted of... whatever that was (extremely low-effort obstruction of justice?), though, she was convicted of defrauding her investors. Notably, she got off on the charges of defrauding her customers, for, truly, it is easier for a camel to fit through the eye of a needle than for a rich person to get in trouble for injuring the general public.
By Sparyjerry 2024-05-105:12 We're actually seeing how much people can read into words too much. There was zero promise by Musk just some guesses and when you buy the car itself it has all sorts of lack of promises.
No, this should be about defrauding people who bought FSD for their Tesla. Most Tesla owners do not care about FSD, according to the estimates of subscription rates.
By Consultant32452 2024-05-0815:31 If we started prosecuting CEOs who don't meet goals/expectations, they'd all be in prison. You have to prove Elon was intentionally lying, which I suspect many on this forum are sympathetic to that view, but in a fair court system that is a difficult standard. You'd have to have emails or some other hard evidence where he acknowledges he knows he's being untruthful. Short of that kind of evidence coming out, they are most likely going after him for political reasons.
By marcusverus 2024-05-0815:515 reply There is an obvious difference between lying and being wrong.
Theranos claimed to already have created their magic machine, which was a blatant lie. They intentionally misled investors by pretending to put samples into a fake testing machine, secretly removing the samples to test them in a lab elsewhere, then putting them back into the machine to make it look like the machine was doing the testing. That's careful, calculated fraud, which was obviously a criminal act.
Musk, by contrast, never claimed to have something that he did not have. He made overly-optimistic claims about product development. There is no reason to assume that these projections were lies, given that everyone else in the space was making similarly aggressive projections.
Musk was wrong for selling FSD-related features before they were ready, and Tesla should obviously make that right. But pretending that being wrong (in good company) is the same thing as calculated fraud is just goofy.
By windexh8er 2024-05-0915:081 reply By this reasoning it would be OK for a car company to market a car with an automatic transmission, yet the clutch was still required to be used on gear changes at delivery. You paid a large premium for the automatic clutch as was marketed by the CEO of the company to be delivered "next year". This claim you bought into was now made over 8 years ago and what the CEO stated has still not been delivered. Your car now has over 120k miles on it with a feature that is only half delivered.
You wouldn't consider this a fraudulent claim?
By uberdru 2024-05-0816:22 It's about revenue recognition. TSLA has beaten estimates multiple times based on revenue recognized from FSD "Beta". There's your fraud.
That's the question: is there any calculated fraud here or was he just vastly overly optimistic?
... but even if there is no calculated fraud, I think some Tesla buyers are owed refunds or other compensation. If a company promises me X, I pay for it, and years later has not delivered X, eventually I need a refund.
By jcranmer 2024-05-0816:21 > Musk, by contrast, never claimed to have something that he did not have.
IIRC, wasn't the video that claimed to demonstrate a full trip conducted by FSD actually like 100 different splices? That right there would be a claim of something that didn't exist.
By malfist 2024-05-0818:47 > Theranos claimed to already have created their magic machine, which was a blatant lie.
And to this day, you can go on Tesla's website, configure a car, and be offered the option to purchase "Full Self Driving Capability" which does not offer a fully self driving vehicle.
By NoMoreNicksLeft 2024-05-0815:165 reply Shouldn't fraud (for the end user/customer) be determined by claims made about the product at the time of sale, and not promises of what might be possible a few years from now?
If you want to say promises of future features is fraud, then surely that would only be in relation to investors?
By peutetre 2024-05-0815:51 In 2016 Tesla claimed that "as of today, all Tesla vehicles produced in our factory – including Model 3 – will have the hardware needed for full self-driving capability at a safety level substantially greater than that of a human driver":
https://www.tesla.com/blog/all-tesla-cars-being-produced-now...
That was a lie.
By jcranmer 2024-05-0815:51 The definition of fraud is going to vary slightly from jurisdiction to jurisdiction, but generally the core elements are:
* Falsity: did the person knowingly make a false statement?
* Materiality: was the false statement something that could reasonably influence someone's decision to agree to a contract?
* Reliance: did the other party actually use the false statement to decide to agree to the contract?
Claims of future capabilities are necessarily going to be evaluated differently from claims of current capabilities, since it's going to be harder to demonstrate all of these points. But for Tesla's FSD promises, we're at 7-ish years now of "coming soon" promises, with marketing materials outright saying it's only regulatory reasons that a driver is needed. Materiality and reliance are slam-dunks at this point; the only out Tesla really has at this point is falsity. Essentially, Tesla has to argue that its engineers were all high on their own hype (which I have to admit it as at least plausible).
"It's almost ready" is a claim about the product at the time of sale.
By boolemancer 2024-05-0815:21 When you are charging people extra for the features you're promising will exist in the future, it seems reasonable to call that fraud if you never deliver.
This site[1], which is a pretty comprehensive list of claims Musk has made and how long it’s been, made the rounds on HN a few times. It’s really incredible how much exaggeration comes out of the guy’s mouth. I don’t think it all counts as fraud, but at some point you gotta say Dude, Stop Talking.
Last month he stood before the SpaceX staff in Boca Chica and outlined how he still believes that he will get 1 million people on Mars by the 2050s. U til they can start producing 100’s of Starships, this is not even remotely realistic. Sending thousands of people to Mars in the next 5 years is not a serious or realistic idea.
By bagels 2024-05-0815:43 I was trying to find the same thing to post. Thank you!
