WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission has sent subpoenas to Tesla Inc (TSLA.O) regarding Chief Executive Elon Musk’s plan to take the company private and his statement that funding was “secured,” Fox Business Network reported on Wednesday, citing sources. 
 
 The electric carmaker’s shares fell as much as 4 percent but cut their losses after Goldman Sachs Group Inc (GS.N) said it was dropping equity coverage of Tesla because it is acting as a financial adviser on a matter related to the automaker. 
 
 Investors viewed the Goldman statement as confirming a tweet from Elon Musk on Monday about working with Goldman, even as the reported subpoenas indicated the SEC has opened a formal investigation into a matter. 
 
 The latest news extended the roller-coaster ride for Tesla investors in recent days, adding to uncertainty about the future course of the company and whether a deal can be done amid growing regulatory complications. 
 
 Tesla and the SEC declined to comment. 
 
 Musk stunned investors and sent Tesla’s shares soaring 11 percent when he tweeted early last week that he was considering taking Tesla private at $420 per share and that he had secured funding for the potential deal. 
 
 The shares fell 2.6 percent to $338.69 on Wednesday, below $341.99, their closing price the day before Musk tweeted his plan to take Tesla private. 
 
 The Tesla CEO provided no details of his funding until Monday, when he said in a blog on Tesla’s website that he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers but that financing was not yet nailed down. 
 
 Musk also tweeted late Monday night he was working with Goldman Sachs and private equity firm Silver Lake as financial advisers. However, as of Tuesday, Goldman was still negotiating its terms of engagement with Musk, according to a person familiar with the matter. 
 
 The 47-year old billionaire’s tweet about secured funding may have violated U.S. securities law if he misled investors. On Monday, lawyers told Reuters Musk’s statement indicated he had good reason to believe he had funding but seemed to have overstated its status by saying it was secured. 
 
 FILE PHOTO: Tesla Motors Inc Chief Executive Elon Musk pauses during a news conference in Tokyo September 8, 2014. Musk said on Monday that he would not be surprised if there was a significant deal with Toyota Motor Corp in the next two to three years, though there were no definitive plans. REUTERS/Toru Hanai/File Photo 
 
 The SEC has opened an inquiry into Musk’s tweets, according to one person with direct knowledge of the matter. Reuters was not immediately able to ascertain if this had escalated into a full-blown investigation on Wednesday. 
 
 This source said Tesla’s independent board members had hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to help handle the SEC inquiry and other fiduciary duties with respect to a potential deal. 
 
 The Wall Street Journal said the SEC was seeking information from each Tesla director. ||||| LISTEN TO ARTICLE 7:17 SHARE THIS ARTICLE Share Tweet Post Email 
 
 Tesla Inc.’s board backed embattled Chief Executive Officer Elon Musk after the Securities and Exchange Commission sued the billionaire for his explosive August tweet about a buyout of the electric-car company he founded. The shares fell 10 percent in pre-market trading. 
 
 The SEC is seeking unspecified monetary penalties and, more importantly, will ask a judge to bar Musk from serving as an officer or director of a public company, the agency said in a lawsuit filed in New York. Musk misled investors by claiming falsely that he had lined up funding for the transaction, the suit alleged. 
 
 Tesla and its board “are fully confident in Elon, his integrity, and his leadership of the company,” they said in a joint statement Thursday. “Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.” 
 
 The prospect of Musk losing control of Tesla unnerved investors already worried about the company’s ability to produce cars fast enough to start generating profits. They dumped the stock, deepening a selloff that began as the go-private gambit quickly unraveled in August. 
 
 “Musk’s statements were false and misleading,” Stephanie Avakian, co-director of the SEC’s enforcement division, said at a press conference in Washington. “They lacked any basis in fact.” 
 
 In the lawsuit and at the news conference, the SEC officers went to great lengths to spell out the Tesla CEO’s carelessness and his erratic behavior -- from threatening to “burn” short-sellers who targeted Tesla stock to seeking to amuse his girlfriend, the pop singer Grimes, by weaving in a “marijuana culture” reference to his go-private bid. (He set a buyout price of $420, a number he landed on in part because it’s code for marijuana consumption.) 
 
 Musk, a serial entrepreneur whose name is synonymous with Tesla, called the lawsuit “unjustified” and said it left him “deeply saddened and disappointed.” 
 
 “I have always taken action in the best interests of truth, transparency and investors,” he said in a statement. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.” 
 
 Tesla, based in Palo Alto, California, wasn’t named in the SEC suit. 
 
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 The SEC had crafted a settlement with Musk that it was preparing to file Thursday morning, the Wall Street Journal reported, citing unidentified people familiar with the matter. Musk’s lawyers called SEC lawyers to say they were no longer interested in proceeding with the agreement, it said. 
 
 The controversy began when Musk shot off a tweet on Aug. 7 saying he was considering taking the company private and had secured funding for a deal. Tesla shares soared immediately afterward. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC said in the complaint. 
 
 Even before the go-private tweet, the SEC was investigating issues at Tesla including its car sales projections. In addition to the SEC suit, the Justice Department is also looking into whether Musk misled investors, Bloomberg News has reported. 
 
 Timeline 
 
 On July 31, the SEC said in its complaint, Musk met with three members of a “sovereign wealth fund” at Tesla’s factory in Fremont, California, for approximately 30 to 45 minutes. In that meeting, a member of the fund expressed interest in taking Tesla private. Musk took that to mean he was proposing a “standard” going-private transaction, but the terms were not discussed. 
 
 Musk has previously said he was talking to Saudi investors about a plan to take the company private. 
 
 On Aug. 2, Musk sent an email to the company’s board of directors, chief financial officer and general counsel with a subject line of “Offer to Take Tesla Private at $420.” In the email, Musk explained he wanted to sidestep the “constant defamatory attacks by the short-selling community, resulting in great harm to our valuable brand.” 
 
 On Aug. 6, Musk discussed a potential takeover with an unnamed private equity executive who has experience with such transactions. That executive told Musk that such a deal was “unprecedented” in his experience. 
 
 The next day, Musk tweeted from his mobile phone: “Am considering taking Tesla private at $420. Funding secured.” Shares rose 11 percent and trading volume spiked. About 12 minutes later, Tesla’s head of investor relations sent a text to Musk’s chief of staff asking, “Was this text legit?” 
 
 ‘Rationale and Structure’ 
 
 About 20 minutes later, the company’s chief financial officer texted Musk: “Elon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors. Would it help if [Tesla’s head of communications], [Tesla’s General Counsel], and I draft a blog post or employee email for you?” 
 
 Musk responded, “Yeah, that would be great.” 
 
 Tesla’s chief financial officer then replied, “Working on it. Will send you shortly.” 
 
 Musk didn’t clarify his statement until an Aug. 13 blog post in which he tried to walk back the tweet. On Aug. 24, the company announced that it would not be pursuing a buyout. 
 
 “Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,” the SEC said. “He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.” 
 
 "Musk’s false and misleading statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors," the SEC went on to say. 
 
 While the filing of the lawsuit wasn’t necessarily surprising, the speed with which it was pulled together shocked many long-time watchers of the SEC, an agency known for being much more deliberate in its actions. Steve Peikin, the SEC’s other co-enforcement director, said the agency felt that the impact would be greatest if the case was brought soon after the alleged misconduct. 
 
 “We conducted a swift investigation here,” Peikin said at the news conference. “The investigation was complete and it was time to make a charging decision and we made one." 
 
 The request to bar Musk from serving as a corporate officer -- which would apply to all publicly traded companies -- could force him to try to reach a settlement quickly. Otherwise, he risks leaving investors wondering about the fate of a company whose image has become intertwined with that of its maverick CEO. 
 
 Tesla fell 10 percent to $277 at 5 a.m New York time in trading before U.S. exchanges opened. 
 
 “It’s unusual for a case of this significance to move this quickly, in particular when you’ve got a high-profile individual,” said Robert Long, a former SEC enforcement attorney now in private practice at Bell Nunnally in Dallas. Still, because the investigation was narrowly focused on several tweets, he said the agency “could have conducted its investigation quickly.” 
 
 — With assistance by Patricia Hurtado, Joshua Fineman, Tom Schoenberg, Jesse Hamilton, Jamie Butters, and Dana Hull ||||| Here's the settlement Musk could have taken from the SEC 8:28 AM ET Fri, 28 Sept 2018 | 05:26 
 
 Tesla did not immediately reply to CNBC's request for comment about the collapse of the deal at the last minute, which was disclosed to Andrew Ross Sorkin by sources who spoke on condition of anonymity. 
 
 Musk said Thursday the SEC's allegations are "unjustified" and that he acted in the best interests of investors. 
 
 "Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees," said Tesla's board of directors in a statement. 
 
 The SEC sued Tesla on Thursday, alleging fraud over Musk's tweet on Aug. 7 in which he announced he was planning to take the company private and had secured funding for the deal. It would have been the largest such transaction of its kind. 
 
 Musk later said in a blog post he had been approached by the Saudi Arabian sovereign wealth fund multiple times about investing in Tesla, making him confident he would be able to secure the funds needed to take the company private at his price of $420 per share. 
 
 Musk called off his plans to take Tesla private on Aug. 24. 
 
 The Wall Street Journal was first to report news of the proposed settlement Musk turned down.
– It sure has been an interesting week for Tesla CEO Elon Musk, and things might get worse before they get better. The controversy began last Tuesday when Musk startled his own company board by announcing that he might take Tesla private and, in fact, had "funding secured." Now the SEC is looking into how Musk handled the announcement, and one law professor tells the Wall Street Journal that "the probability that there will be an SEC enforcement action is, I think, quite high." Meanwhile, some bizarre accusations about Musk emerged from rapper Azealia Banks. Coverage: Musk's explanation: On Monday, Musk wrote in a blog that he's been in talks with Saudi Arabia's sovereign wealth fund to provide the needed money to take the company private. The post appeared to be an attempt to quell the controversy over his initial tweet, notes the New York Times, which talks to people familiar with the Saudi fund who say a deal is nowhere close. In fact, the story asserts that Musk made his initial tweet with "little forethought." On Monday, Musk also tweeted that he was getting legal and financial advice on a deal from Goldman Sachs and others.