The U.S. Securities and Exchange Commission sued Tesla Inc. chief executive Elon Musk on Thursday, accusing him of securities fraud for making a series of "false and misleading" tweets about potentially taking the electric car company private.

In a complaint filed in Manhattan federal court, the SEC said Musk "knew or was reckless in not knowing" that he was misleading investors on Aug. 7 by telling his more than 22 million Twitter followers that he might take Tesla private at $420 per share, and that there was "funding secured."

The complaint also faults subsequent tweets in which Musk said "investor support is confirmed," and that a "special purpose fund" might be created for investors who stick with the Palo Alto, Calif.-based company.

The suit alleges that Musk's tweet about secured funding was based on a 30- to 45-minute conversation with a Saudi regarding a potential investment of an unspecified amount.

It says the meeting with Saudi Arabia's sovereign wealth fund on July 31 did not "even address the most fundamental terms" of a go-private deal, and that Musk did not communicate with the Saudis again until three days after his controversial tweets.

Tesla's shares fell 12 per cent in after-hours trading.

The company issued a response from Musk via email.

"This unjustified action by the SEC leaves me deeply saddened and disappointed," he said in the statement. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."

In a brief joint statement, Tesla and its board of directors said they are "fully confident" in Musk, his integrity and his leadership of the company. The statement said their focus remains ramping up production of the company's Model 3 sedan — which has seen serious production issues and delays — and "delivering for our customers, shareholders and employees."

Seeks to bar Musk from running public firms

Thursday's lawsuit makes Musk one of the highest-profile executives to be accused by the SEC of securities fraud.

It seeks to bar him from running public companies, which would include Tesla, as well as to impose a civil fine.

The SEC does not have criminal enforcement power.

"Neither celebrity status nor reputation as a technological innovator provides an exemption from federal securities laws," Stephanie Avakian, co-director of enforcement at the SEC, told a news conference announcing its charges against Musk.

Musk has long used Twitter to criticize short-sellers betting against his company, and several investor lawsuits have been filed against him and Tesla over the tweets.

On Aug. 24, after news of the SEC probe had become known, Musk blogged that Tesla would remain public, citing investor resistance.

Tesla has been on a roller-coaster ride in recent weeks. Shares dropped as much as 10 per cent after Musk appeared smoking marijuana, drinking whisky and wielding a sword during a webcast.

Musk appeared on a live YouTube webcast earlier this month and was filmed smoking marijuana, drinking whisky and wielding a sword. (Joe Rogan/YouTube)

That came just hours after the automaker announced its new accounting chief would leave after a one-month stint.

In July Musk got into a high profile spat with one of the British divers who helped rescue a group of young soccer players from a cave in Thailand.

Musk called Vernon Unsworth a pedophile, in a tweet he later deleted.

Unsworth launched a defamation suit against Musk on Sept. 17.

With files from The Associated Press