The Securities and Exchange Commission has sued Tesla CEO Elon Musk for securities fraud after his aborted attempt to take the company private earlier this summer. The complaint, filed in federal court in the Southern District of New York, shows that the SEC is seeking to ban Musk from being able to hold officer or director positions at publicly-traded companies, as well as any other damages the court feels are appropriate.

Musk originally announced that he was considering taking Tesla private in a tweet on August 7th, adding that he had “funding secured” to take on such an effort. In subsequent tweets, Musk made it seem that all it would take to de-list the company from the stock market, then, was the approval of its shareholders. Musk later claimed that Saudi Arabia’s sovereign wealth fund was in talks with Tesla to potentially fund the effort, but eventually abandoned the idea on August 24th. The SEC subpoenaed Tesla just one week after Musk’s original tweet.

“In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” prosecutors write in the complaint. Specifically, they say Musk’s “funding secured” tweet was “false and misleading.” Prosecutors say that Musk’s subsequent statements were false and misleading, too.

“Musk had not even discussed, much less confirmed, key deal terms”

“Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions,” they write. “Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going- private transaction.”

Musk called the SEC action unjustified and said he was disappointed. “I have always taken action in the best interests of truth, transparency and investors,” Musk said in a statement to BuzzFeed. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.” Dave Arnold, a spokesman for Tesla, didn’t immediately respond to a request for comment.

Prosecutors note that Musk’s tweets on August 7th sent Tesla’s stock price up, creating immediate value for investors, but that the resulting chaos in the following weeks ultimately did those shareholders harm.

“We believe our actions have the most impact when they’re brought most closely in time to the events that bring them forth,” said Steven Peikin, co-director of the SEC’s enforcement division, in a press conference today.

“His actions were, for a public company CEO, way out of line,” Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, tells The Verge. “Everything in the last couple months has been very disturbing for investors. The rules didn’t seem to apply, and the SEC believes they did, or should.”

“His actions were, for a public company CEO, way out of line”

Musk has been battling short sellers — traders who bet Tesla stock will decline —on his Twitter account for a while, and this is part of the basis for the SEC’s complaint. By August 18th, the SEC notes, more than $13 billion shares of Tesla were shorted. And Musk hates shorts. The SEC cites just two of his anti-short tweets (“Oh and uh short burn of the century comin soon. Flamethrowers should arrive just in time,” from May; “They have about three weeks before their short position explodes” from June), though there are plenty of other taunts to choose from.

Pressure from the shorts was cited by Musk as a reason to take Tesla private, the SEC notes in its complaint. On August 2nd, Musk emailed Tesla’s board of directors, head of finance, and general counsel to explain his reasoning for taking Tesla private. In the email, Musk wrote that being public “[s]ubjects Tesla to constant defamatory attacks by the short-selling community, resulting in great harm to our valuable brand,” the SEC complaint says.

“Basically, a lot of it related to his tweets.”

“This reinforces the idea that maybe he was trying to manipulate the price,” says Chester Spatt, a former chief economist for the SEC who is now a distinguished senior fellow at MIT’s Sloan School of Management. According to both Spatt and Elson, the SEC moved unusually quickly in filing its suit. “The issues in some respects may have been relatively plain vanilla,” Spatt says. “Basically, a lot of it related to his tweets.”

Cases like this usually take a long time, according to Elson, and a likely outcome is that Musk reaches a settlement with the SEC that involves payment of a fine. “But who knows? Maybe he’ll fight it all the way through,” he says. The Wall Street Journal reported that in fact the SEC and Musk did reach a settlement — but Musk pulled out this morning. After that, the SEC filed as quickly as it could.

Tesla’s board should be nervous, both Spatt and Elson say. According to Elson, Tesla board members should expect to be deposed. Spatt says that the board should begin planning for succession. “They need to recognize that they can’t simply rely on Musk,” Spatt says.

There may be consequences for Musk’s other companies too. If the SEC does bar Musk from being an officer of a publicly traded company, that may mean that SpaceX, Boring Company, and NeuraLink can’t go public with Musk there. And at least some of the premium in Tesla’s stock has been related to Musk’s position as CEO — so if he must step down, that is potentially trouble for Tesla, too.

The SEC is a civil agency, and typically doles out fines to companies and executives who are involved in rule violations. But the commission can remove a person’s ability to serve as director or officer of publicly-traded companies, a route it recently took with Theranos CEO Elizabeth Holmes. The Justice Department has reportedly also opened a criminal investigation into Musk’s tweets about the attempt to take Tesla private.

With reporting by Andrew J. Hawkins.

Updated 9:12PM ET: Adds reporting of an aborted settlement between Musk and the SEC