CEO Elon Musk rejected an offer to settle fraud allegations with the federal government, sources told CNBC, and now a tremendous amount of uncertainty hangs over his company, say experts.

A deal from the Securities and Exchange Commission offered Musk a chance to settle the charges that he deceived investors about taking Tesla private and it would have been an "ideal scenario" for Tesla, said Garrett Nelson, an analyst for investment research firm CFRA. But now Tesla will have a potential battle with the government hanging over its head while it pursues key goals, and if it loses, it risks its most important person: Musk himself.

"He was offered a very attractive option with the settlement, he rejected it and now he is rolling the dice," Nelson said.

If the SEC wins a battle with Tesla and chooses to dole out the harshest penalty it can, Musk faces the possibility of being banned from serving as an executive or director of any public company.

"If the SEC chooses to move forward, it's completely uncertain he will remain with the company at all, given what they are pushing for," Nelson said. "And I think it would be disastrous for the future of the company."

It is hard to overstate how important Musk is to Tesla. He is chairman, CEO, and he owns about 20 percent of the company. He is also widely seen as a visionary leader who is very much the face of Tesla. The automaker's stock trades at an enormous multiple, and that is driven by Musk's presence and what his vision might mean for the company's future, Nelson said. If Musk is gone, that multiple will shrink.

Shares of Tesla fell nearly 14 percent Friday, its worst one-day decline since Nov. 6, 2013.

Lifetime bans are rare, said Bernstein analyst Toni Sacconaghi in a note published Friday. But several executives have been temporarily banned from their companies. Hedge fund manager Steve Cohen was banned for two years, television star and entrepreneur Martha Stewart was banned for five years, and biotech executive Elizabeth Holmes was banned for 10 years, Sacconaghi said.

People familiar with the matter told CNBC a deal with the SEC would have prevented Musk from having to step down as CEO.

Even a temporary ban, or simply a long legal battle, could be damaging at such a pivotal time for Tesla — the company is ramping up deliveries of its Model 3 sedan, a car meant to push Tesla toward becoming a major automaker.

Tesla's products are outstanding and it still has a leg up over competitors, but some rivals are catching up in terms of technology pretty quickly, Nelson said. This is particularly true of BMW, Audi, and Jaguar. All three have released premium electric vehicles, and intend to become serious players in the market. Audi unveiled its e-tron, an all-electric SUV, last week and expects to bring it to market next spring.

And it is widely believed that Tesla will need to raise more capital at some point in 2019.

"If this uncertainty is still lingering, it becomes a lot harder or a lot more expensive to raise money," Nelson said.

In general, uncertainty around a company's leadership hurts long-term performance and the ability to retain talent, said Dale Jones, who is president and CEO of recruiting firm Diversified Search. Removing that uncertainty is crucial, particularly at a company like Tesla, since Musk represents the "heart and soul" of the business, he said.

"That is the crux of this," he said. "In order for organizations to be successful you have to remove any appearance of uncertainty in leadership. That has to be fixed, whether it is a renewed commitment to get behind the leader or develop a succession plan."

Jones added that Tesla lost two high-profile leaders in recent weeks and has had a lot of turnover in its ranks in general, which was already creating the appearance of instability.

Tesla was not immediately available for comment on Friday. However the board sent a statement to CNBC on Thursday regarding the charges, which stem from a tweet Musk made on Aug. 7 in which he announced he was planning to take the company private and had secured funding for the deal. Tesla shares soared, only to reverse later when the deal didn't materialize. Musk called off his plans on Aug. 24.

"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," the statement said. "Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees."

Tesla's board has been historically supported Musk, to the point that some shareholders have called for more independent governance. The SEC's deal offer also asked Tesla to appoint two more independent directors, sources said. That settlement would have brought changes to the board many shareholders have wanted, Nelson said.

But now, it remains to be seen how Tesla's directors will act, or it will face fresh criticism.

"I think the big question is the board," said Charles Elson, who is director of the Weinberg Center for Corporate Governance at the University of Delaware. "They haven't done anything so far, and honestly if they don't react to this in some appropriate manner, then they end up in the spotlight."