Elon Musk's relationship with the SEC might get even more tense.
Neuralink, a startup Musk founded in Fremont in 2016, downplayed Musk's involvement in the company when it petitioned the Securities and Exchange Commission for a waiver that would allow it to keep funding disclosures private, according to a report Friday in Fortune.
The request was made in 2018 after Musk and Tesla settled a lawsuit that the SEC brought over Musk's claims on Twitter that he was preparing to take the electric car company private.
That settlement cost Musk his chairman position for three years, and Tesla agreed to vet Musk's social media content. Both Musk and Tesla paid $20 million fines.The SEC also designated Musk as a so-called "bad actor," potentially impacting other companies that he's involved with, like Neuralink.
Neuralink is attempting to build a brain-machine interface that would allow a human being to interact with and control a computer with just their brain — no mouse, no keyboard, no dongles. In early 2021, Musk said the company had successfully implanted a device into a monkey's brain that allowed it to "wirelessly" play Pong, the 1970s arcade game.
Neuralink raised a $107 million Series A in August 2017 and an undisclosed round in June 2019, according to Pitchbook.
But Musk's "bad actor" designation from the 2018 settlement could have impacted Neuralink's ability to keep private share sales undisclosed. So the startup's lawyers asked the SEC for a waiver on Sept. 28, 2018. The Tesla settlement was announced the next day.
In its request for a waiver, Neuralink lawyer Roel Campos, a former SEC commissioner, stated that Musk “has no executive or management role at Neuralink.” Campos also stated that Musk “has no executive or management role at Neuralink” and “does not serve as an officer or director of Neuralink.”
But Musk did control more than 20% of the company, according to the petition. And several former employees told Fortune that Musk referred to himself as Neuralink's CEO, always had the final say on major decisions and "definitely had executive authority."
Musk was listed as an executive officer in a 2021 Form D filing for Neuralink's $205 million Series C round, but he was not named in filings for the company's Series A in 2017 or Series B in 2019.
Taken together, the funding disclosures and waiver request could be considered misleading, but securities law experts interviewed by Fortune were split as to whether this would trigger a response, and action, from the SEC.
The House Financial Services committee has also been trying to crackdown on SEC waivers for so-called bad actors. The panel has attempted to pass legislation several times since 2015, and the most recent version would have subjected waiver applications to public hearings and "forced the SEC to find that the waiver was in the public interest, was necessary to protect investors, and promoted market integrity, before one could be granted," according to Fortune.
In early 2019, the SEC sued Musk for allegedly violating the 2018 settlement agreement by failing to have his social media content vetted by lawyers prior to posting material statements. A judge later approved an amended settlement agreement stipulating more specific oversight of Musk's tweets.
Musk has made his feelings about the SEC abundantly clear over the past few years. In 2018, he nicknamed the agency the "Shortseller Enrichment Commission." And in 2020, he tweeted that the SEC could perform a sexual act on him.
