The US prosecutors focus on securities and wire fraud

Digital Trends

Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changes – but are not fully autonomous.
Investigators are exploring whether Tesla committed wire fraud, which involves deception in interstate communications, by misleading consumers about its driver-assistance systems, the sources said.
They are also examining whether Tesla committed securities fraud by deceiving investors, two of the sources said.
The Securities and Exchange Commission is also investigating Tesla’s representations about driver-assistance systems to investors, one of the people said.
Last October, it disclosed in a filing that the Justice Department had asked the company for information about Autopilot and Full Self-Driving.
Reuters could not determine the specific statements prosecutors are reviewing as potentially illegal.
“Mere failure to realize a long-term, aspirational goal is not fraud,” Tesla lawyers said in a 2022 court filing.
The NHTSA investigation found “a critical safety gap between drivers’ expectations” of Tesla’s technology “and the system’s true capabilities,” according to agency records.



May 8 (Reuters) – The U.S. S. Prosecutors are investigating if Tesla, Inc. O)New Tab, opens new tab committed securities or wire fraud by deceiving customers and investors regarding the self-driving capabilities of its electric vehicles, three individuals with knowledge of the situation told Reuters.

While they can help with lane changes, braking, and steering, Tesla’s Autopilot and Full Self-Driving systems are not entirely autonomous. Although Elon Musk, the CEO of Tesla, has cautioned drivers to be prepared to take over when driving, the Justice Department is looking into additional remarks Musk and Tesla have made indicating that their vehicles are self-driving.

You. s. Following independent investigations into hundreds of crashes involving Teslas operating on Autopilot, including some fatalities, regulators forced the automaker to issue a widespread recall.

Reuters only revealed the U.S. s. federal prosecutors launched a criminal investigation into Tesla in October 2022, and they are the first to disclose the precise criminal liability under review.

According to the sources, investigators are examining whether Tesla misled customers about its driver-assistance systems in order to commit wire fraud, which is defined as deception in interstate communications. Two of the sources stated that they are also investigating the possibility that Tesla misled investors in order to commit securities fraud.

According to one of the people, Tesla’s claims to investors regarding its driver-assistance systems are being looked into by the Securities and Exchange Commission. The SEC chose not to respond.

To a request for comment, Tesla did not reply. The company revealed in a filing from last October that the Justice Department had requested data regarding Autopilot and Full Self-Driving.

The Justice Department did not respond to requests for comment.

The investigation, which is not proof of misconduct, may lead to criminal prosecution, civil penalties, or nothing at all. According to one of the sources, prosecutors are still in the process of sorting through the extensive files Tesla submitted in response to subpoenas, so they are far from making a decision about the case.

The precise statements that prosecutors are considering as possibly unlawful were not identified to Reuters. For almost ten years, Musk has aggressively bragged about the capabilities of Tesla’s driver-assistance technology.

The statement “The person in the driver’s seat is only there for legal reasons” appears in Tesla videos showcasing the technology that are archivedNew Tab, opens new tab on their website. He is not acting in any way. The vehicle operates on its own. “.

In 2022, a Tesla engineer provided testimony in a lawsuit concerning a fatal Autopilot crash. The engineer stated that one of the videos, which was uploaded in October 2016, was meant to demonstrate the technology’s potential rather than accurately depict its capabilities at the time. Despite this, Musk shared the video on social media, writing: “Tesla finds a parking space after driving itself through metropolitan and highway streets without any human input.”. “.

Musk stated that Autopilot is “probably better” than a human driver during a 2016 conference call with media. In a call from October 2022, Musk talked about an upcoming FSD update that would let users go “to your work, your friend’s house, to the grocery store without you touching the wheel.”. “.

Musk is concentrating more and more on autonomous vehicle technology as Tesla’s auto sales and earnings decline. A long-awaited $25,000 model that was supposed to boost sales was shelved by Tesla, which recently reduced expenses by firing a large number of employees.

The billionaire executive wrote, “Going balls to the wall for autonomy is a blindingly obvious move,” on his social media platform X in the middle of April. After Musk visited China in late April and made progress toward obtaining approvals to sell FSD there, Tesla shares—which had dropped more than 29% so far this year—soared.

For almost ten years, Musk has made consistent promises about self-driving Teslas. In a 2022 court filing, Tesla’s attorneys stated, “Mere failure to realize a long-term, aspirational goal is not fraud.”.


The people familiar with the investigation said that prosecutors are being cautious in their investigation of Tesla’s autonomous car claims because they are aware of the legal obstacles they must overcome.

According to three legal experts unrelated to the investigation, they will have to show that Tesla’s claims went beyond legitimate salesmanship and into the realm of material and willful false statements that illegally hurt investors or consumers.

You. s. In the past, courts have determined that product claims that are perceived as “puffery” or “corporate optimism” do not constitute fraud. 2008 saw the ruling by a federal appeals court that corporate optimism statements by themselves do not prove that a company official deliberately misled investors.

Daniel Richman, a professor at Columbia Law School and former federal prosecutor, predicted that Justice Department representatives would probably look for internal Tesla communications as proof that Musk or others knew they were making false claims. Richman acknowledged that this is a challenge, but added that the danger of overselling self-driving systems to consumers also “speaks to the seriousness with which prosecutors, a judge, and a jury would take the statements.”. “.


Lawsuits and regulatory investigations have scrutinized Tesla’s assertions regarding Autopilot and FSD.

Recently, courts and safety regulators have expressed concern over corporate messaging about the technology, which includes the names Autopilot and Full Self-Driving, giving consumers a false sense of security.

Police records indicate that in April, a man was detained by the Washington State Patrol on suspicion of vehicular homicide following the death of a motorcyclist struck by a Tesla that was operating on Autopilot while the driver was distracted by a phone. A trooper referenced the driver’s “admitted inattention to driving, while on autopilot mode .” in a probable-cause statement. entrusting the vehicle to drive on his behalf. “.

According to a state patrol spokesperson who spoke to Reuters, a driver in Washington state is still “responsible for the safe and legal operation of that vehicle” regardless of its technological advancements.

In the same month, the U.S. S. The National Highway Traffic Safety Administration began looking into whether safety concerns with Autopilot were sufficiently addressed in the December Tesla recall affecting over 2 million vehicles.

The NHTSA chose not to respond.

Following the publication of this story, U. S. A statement released on X by Massachusetts Democrat Senator Edward Markey expressed his satisfaction with the NHTSA and Justice Department officials “getting tough on Tesla over these dangers.” Markey has long been a critic of the company’s driver-assistance systems. “.

The recall came after a protracted investigation launched by authorities due to multiple collisions between cars at first responder emergency scenes involving vehicles operating on Autopilot. After that, regulators looked into hundreds of crashes in which Autopilot was activated and found 14 fatalities and 54 injuries.

While agreeing to the recall that used over-the-air software updates to alert careless drivers, Tesla refuted the NHTSA’s findings.

NHTSA records state that the agency’s investigation discovered “a critical safety gap between drivers’ expectations” of Tesla’s technology and “the system’s true capabilities”. “Predictable misuse and preventable crashes were caused by this gap. “.

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Additional reporting was done in San Francisco by Hyunjoo Jin and in Washington, D.C. by David Shepardson and Mike Spector. Brian Thevenot and Matthew Lewis handled editing.

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As a reporter for Reuters, Mike Spector covers corporate crises such as government investigations, mass tort lawsuits, and bankruptcy. He was the first to reveal Johnson and Johnson’s intention to dump bankruptcy cases claiming that the company’s well-known Baby Powder was carcinogenic. In an investigative series, he later disclosed how JandJ and other companies and charitable organizations utilize the bankruptcy system to avoid filing for Chapter 11 bankruptcy and to shield themselves from lawsuits pertaining to sexual abuse and deadly products. Additionally, Mike has contributed to a Reuters series that won an award for exposing the widespread secrecy in American courts that conceals evidence of dangerous products. In addition to covering the auto industry, Mike had previously worked for The Wall Street Journal as a mergers and acquisitions reporter covering bankruptcy and private equity. He has worked on award-winning teams covering government-brokered General Motors’ bankruptcy and rescue, insider trading and related bankruptcy debt-trading issues, and growing worries about Tesla’s self-driving car technology. He graduated from Johns Hopkins University with an undergraduate degree and the journalism master’s program at Columbia University.

Chris Prentice covers financial crimes, specializing in cases involving securities enforcement. She has previously written about trade policy and commodities markets. She has won awards from the Newswomen’s Club of New York and the Society for Advancing Business Editing and Writing for her work.

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