The US Securities and Exchange Commission (SEC) has accused Tesla CEO and founder Elon Musk of fraud.
Reports says it is seeking to remove him from his role in charge of Tesla after he made a series of 'false and misleading' tweets about potentially taking Tesla private.
Reuters reported that in the lawsuit, the regulator described Musk surprising members of his own team and investors with a series of tweets in August about taking the company private.
The Department of Justice, which has the authority to press criminal charges, has also questioned the company about Musk's tweets.
Reuters reported that Tesla shares have tumbled by over 10% following the news.
"Elon is Tesla and Tesla is Elon and that's great when Elon is scoring touchdowns and grand slams but not so great when there are negative things tied to him," said Karl Brauer, executive publisher at car research firm Kelley Blue Book.
Reuters reported that Musk said he had done nothing wrong. "This unjustified action by the SEC leaves me deeply saddened and disappointed," he reportedly 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."
The report added that Tesla's board said they are "fully confident" in Musk.
Reuters reported that the SEC said Musk calculated the $420 price per share (in proposing to take Tesla private) based on a 20 percent premium over that day's closing share price and because of the number's slang reference to marijuana. The lawsuit, which cites emails and text messages between Musk and Tesla executives, quoted Musk as saying he thought his girlfriend "would find it funny, which admittedly is not a great reason to pick a price".
Reuters said the SEC move to bar Musk as an officer of any public company was a rare move for the SEC against the CEO of a well-known firm.