Tesla is being investigated for securities and wire fraud for self-driving claim

https://www.theverge.com/2024/5/8/24151881/tesla-justice-investigation-securities-wire-fraud-self-driving

by chollida1 • 2 years ago

172 163 2 years ago

_akhe9• 2 years ago

Securities fraud again, funny that the guy who "bought Twitter" and shut down free speech ended up getting sued himself due to his own tweet (lying about # of Teslas being produced).

It's like a bully trying to chase someone but tripping over their shoelace in the first step, love it.

On self-driving: For several years the guy has been saying "next month" "next year" it's been like 10+ years at this point. He's a bigger grifter than the Ashes of Creation guy (8 year long Kickstarter MMO that never launched and still collects payments to this day). Wonder why anyone falls for it, feel bad for the gullible.

neglesaks2• 2 years ago

I believe you can summarize Mr. Musk's persona (including his speech and promises made or hinted at) as "unreliable".

nullorempty• 2 years ago

I think Musk is just relaying the promises he receives from ML/AI guys he employes. As far as I know FSD has always been a paid option.

jajko• 2 years ago

This is irrelevant, he is public CEO and has tons of responsibilities. Basically lying to millions of customers in very public manner is a serious issue.

mikestew• 2 years ago

And after years of publicly looking like a lying car salesman, why would he still listen to those employees? I don’t think it’s the line employees that are lying here.

kube-system6• 2 years ago

Given what I've read about his management style, I doubt it's like that. Probably more like:

Musk: Hey get your shit together I want this done by the end of the year

Team: Okay we'll try

Musk: Okay we'll plan on that

adrr4• 2 years ago

I am sure if he allowed customers to get refunds on FSD, the DOJ wouldn't open a criminal case.

windexh8er4• 2 years ago

FSD, in its current iteration, is not what Musk has promised since 2016. FSD is not autonomous or even remotely close to driverless operation as he's claimed it would be. FSD is ultimately a marketing gimmick.

stronglikedan• 2 years ago

"bought Twitter" and shut down free speech

Citation needed. The platform is more open and vibrant than ever, even going so far as to reinstate free speech that old Twitter shut down at the request of the US government. If anything, he liberated free speech and it shows.

_akhe9• 2 years ago

The platform is more open and vibrant than ever

You reveal your lack of experience with Twitter, it's declined a lot.

Pretty sure you can't even link to a tweet (a xweet?) from a news article or blog post - they totally killed the platform, not sure where you've been.

slashdev• 2 years ago

1) Linking to Tweets still exists, and doesn't require that you're logged in to view them.

2) According to their own released numbers (which you may or may not trust), the usage of the platform is at a record high.

3) They've unbanned many accounts that were previously banned and seem to display a wider tolerance for free speech on the platform. The innovative community notes feature is sometimes helpful to point out misinformation, but misinformation thrives on the platform.

4) They've pushed back on various foriegn governments requesting data on users and requesting users or posts be banned (see the ongoing dispute with Brazil.)

It seems more free, not less free.

ceejayoz7• 2 years ago

The innovative community notes feature...

... was built and released pre-Musk, when it was called "Birdwatch".

https://en.wikipedia.org/wiki/Community_Notes

As for government requests, for every Brazil there's an India. https://theintercept.com/2023/03/28/twitter-modi-india-punja...

"Twitter accounts from over 100 prominent politicians, activists, and journalists in India and abroad have been blocked in India at the request of the government. On Monday, the account of the BBC News Punjabi was also blocked — the second time in a few months that the Indian government has used Twitter to throttle BBC services in its country."

"At the time that Musk took charge of the company, it had a mere 20 percent compliance rate with Indian government requests. Following massive layoffs that reduced 90 percent of Twitter India’s staff, the platform appears to have become far more obliging in the face of government pressure, as its actions to censor its critics now show."

piva00• 2 years ago

4) They've pushed back on various foriegn governments requesting data on users and requesting users or posts be banned (see the ongoing dispute with Brazil.)

But not in India, nor Turkey, there Twitter under Musk has abided by the requests to silence people.

Why is that is a good question, it could be political alignment (Modi and Erdogan are from a different political stance than Lula), it could be because Musk seeks to exploit Brazil's lithium, we can't know but he's been pretty selective in where to pick a fight so we can only assume is due to other circumstances than anything to do with freedom of speech.

windexh8er4• 2 years ago

It seems more free, not less free.

Regardless of whether or not that statement made is true - the problem is that of misinformation distribution. Social media isn't socially useful if it's being leveraged to influence ideas that are not factual.

Given that the owner of the platform has pushed misinformation and also sells products that don't align with what he's promised, at least to me, would lead me to question the statistics that are self-published and unable to be publicly validated.

williamsmj• 2 years ago

This is just the Verge regurgitating a Reuters article that has already been posted https://news.ycombinator.com/item?id=40297126.

glitchc• 2 years ago

About time.

Lendal• 2 years ago

I had a feeling this was coming. I bought FSD in 2020. It was $10K, and they were claiming in one year you could summon the car to come to you from across town or rent it out as a self-driving taxi service. I figured it might work, and in the meantime would be a fun toy, so I bought into it as a speculation. On an individual basis this was just poor judgement on my part, but when you multiply that by how many other customers thought similarly to how I did, maybe it does become a government issue then.

Unfortunately for me, I soon discovered that I did not like the car driving me around. No matter how good it got, I would almost always have made a different decision in most traffic situations. So it was a huge loss, but for me it doesn't even have to do with the fact the technology doesn't do what their hype claimed. It has to do with the fact that letting FSD drive is more stressful than if I just drive the car myself.

jaxomlotus• 2 years ago

There isn't even a point to it if it requires you to keep your hands on the wheel and not look at your phone. I would want to use it so I could conduct business while the car took care of driving. If it still requires me to pay strict attention to the road and keep both hands on the wheel, then it's just a novelty to show off to passengers for a quick giggle, but not actually solving a problem.

Sparyjerry7• 2 years ago

None of those claims were claims by them, they were claims you hoped for. If you look at what was actually said it was all at random interview or podcasts, rarely if ever even at a Tesla release or event. PLus it was all "I Think.." if you want to fault a CEO for being optimistic, literally every CEO in the world should be in jail. Do you know how many "World's Best Burger" restaurants there are? The only actual claims that could be considered valid are those by the website when the purchase of the car was actually taking place, which promised exactly none of that.

louwrentius• 2 years ago

I’ve seen the same meme over and over again in many different youtube videos: Elon musk assuring self-driving is just around the corner, just another few months…

The investigation doesn’t interest me much. He has gotten slaps on the wrist before. Wake me up when he gets jail time.

Firaxus• 2 years ago

As someone with a tesla and with a parent who bought the fsd beta package, I’d be very interested if there’s some kind of payout for consumers/customers!

lolc4• 2 years ago

There was this thread[0] around here about one buyer of FSD who took Tesla to small claims court and Tesla settled with them. Looks like it's easy enough to do.

It's just that Tesla demands gag clauses in the settlement which may be accepted by many people and we might never know how many settlements are out there. Thankfully the author in this instance knew they were going to win and there would be no gag clauses then. So why accept them in the settlement? Tesla caved, because they knew this too.

[0] https://news.ycombinator.com/item?id=38146676

chollida12• 2 years ago

This is about defrauding people who bought a tesla, not investors.

In 2020, Musk told a crowd in Shanghai that he remains “confident” that Tesla will achieve “basic functionality for level five autonomy this year,” referring to the SAE’s rankings of autonomy. Tesla’s technology, in 2024, is still at level 2.

This reminds me alot of the Thernos case where she tried to make the case not about fraud but about an overly optimistic CEO promising something and being wrong about that. here Musk has clearly said that full self driving would be available many years ago.

So I guess we're trying to figure out how much lying is ok by a CEO before it becomes fraud to the buyer.

bunderbunder2• 2 years ago

As the article explains, wire fraud is about defrauding consumers, and securities fraud is about deceiving investors. Tesla is under investigation for both.

paxys2• 2 years ago

Wire fraud is nowadays just a catch-all for "crime involving money". Regardless of all other specifics of the case, it is a certainty that at some point someone sent a text message or used a computer, so that's what the feds will go after.

Ran a scammy crypto exchange out of the Bahamas? Took money from investors for a failed blood testing company? Raised money for a political campaign but spent it on hookers? Paid a hitman to kill your spouse? All wire fraud.

adrr4• 2 years ago

I purchased FSD in 2019 on the promise of self driving. 5 years later and still no self driving. There was also the promise of the car being able to self park. I would be happy if I got my money back for a feature that was never delivered.

w0m2• 2 years ago

same. at least we got in before the price jumped? We don't even have a hope as the new MCU doesn't even support getting backported to our car even if we were willing to pay for it.

steelframe• 2 years ago

As my grandfather used to put it, you paid some "tuition of life" for a lesson you'll (hopefully) not soon forget.

bagels3• 2 years ago

I couldn't imagine paying $12,000 for technology that didn't exist, from someone who repeatedly lied about that technology existing.

NoMoreNicksLeft4• 2 years ago

Shouldn't fraud (for the end user/customer) be determined by claims made about the product at the time of sale, and not promises of what might be possible a few years from now?

If you want to say promises of future features is fraud, then surely that would only be in relation to investors?

ceejayoz7• 2 years ago

"It's almost ready" is a claim about the product at the time of sale.

boolemancer• 2 years ago

When you are charging people extra for the features you're promising will exist in the future, it seems reasonable to call that fraud if you never deliver.

kube-system6• 2 years ago

Of course not, a huge number of (if not most) contracts contain agreements regarding future delivery of product or services. This is valid and normal arrangement. The contract is a promise to deliver that. If you don't deliver, you have breeched the contract.

jcranmer4• 2 years ago

The definition of fraud is going to vary slightly from jurisdiction to jurisdiction, but generally the core elements are:

* Falsity: did the person knowingly make a false statement?

* Materiality: was the false statement something that could reasonably influence someone's decision to agree to a contract?

* Reliance: did the other party actually use the false statement to decide to agree to the contract?

Claims of future capabilities are necessarily going to be evaluated differently from claims of current capabilities, since it's going to be harder to demonstrate all of these points. But for Tesla's FSD promises, we're at 7-ish years now of "coming soon" promises, with marketing materials outright saying it's only regulatory reasons that a driver is needed. Materiality and reliance are slam-dunks at this point; the only out Tesla really has at this point is falsity. Essentially, Tesla has to argue that its engineers were all high on their own hype (which I have to admit it as at least plausible).

peutetre2• 2 years ago

In 2016 Tesla claimed that "as of today, all Tesla vehicles produced in our factory – including Model 3 – will have the hardware needed for full self-driving capability at a safety level substantially greater than that of a human driver":

https://www.tesla.com/blog/all-tesla-cars-being-produced-now...

That was a lie.

Consultant32452• 2 years ago

If we started prosecuting CEOs who don't meet goals/expectations, they'd all be in prison. You have to prove Elon was intentionally lying, which I suspect many on this forum are sympathetic to that view, but in a fair court system that is a difficult standard. You'd have to have emails or some other hard evidence where he acknowledges he knows he's being untruthful. Short of that kind of evidence coming out, they are most likely going after him for political reasons.

ryantgtg• 2 years ago

No, this should be about defrauding people who bought FSD for their Tesla. Most Tesla owners do not care about FSD, according to the estimates of subscription rates.

paxys2• 2 years ago

Plenty of people bought Teslas anticipating that they'd buy FSD when it fully worked "next year".

chollida12• 2 years ago

No, this should be about defrauding people who bought FSD for their Tesla.

Yes, it sounds like you and I are in complete agreement:)

FireBeyond2• 2 years ago

This reminds me alot of the Thernos case where she tried to make the case not about fraud but about an overly optimistic CEO promising something and being wrong about that.

Right, and that fell apart with, well, many things, but the one that stands out to me - upcoming FDA inspection, and Holmes (in something out of a cartoon) literally had someone put a filing cabinet in front of the door to the lab where they were doing actual work to hide it, and direct inspectors to a faked up lab, i.e. outright fraud and deception.

rsynnott• 2 years ago

She wasn't convicted of... whatever that was (extremely low-effort obstruction of justice?), though, she was convicted of defrauding her investors. Notably, she got off on the charges of defrauding her customers, for, truly, it is easier for a camel to fit through the eye of a needle than for a rich person to get in trouble for injuring the general public.

marcusverus• 2 years ago

There is an obvious difference between lying and being wrong.

Theranos claimed to already have created their magic machine, which was a blatant lie. They intentionally misled investors by pretending to put samples into a fake testing machine, secretly removing the samples to test them in a lab elsewhere, then putting them back into the machine to make it look like the machine was doing the testing. That's careful, calculated fraud, which was obviously a criminal act.

Musk, by contrast, never claimed to have something that he did not have. He made overly-optimistic claims about product development. There is no reason to assume that these projections were lies, given that everyone else in the space was making similarly aggressive projections.

Musk was wrong for selling FSD-related features before they were ready, and Tesla should obviously make that right. But pretending that being wrong (in good company) is the same thing as calculated fraud is just goofy.

api3• 2 years ago

That's the question: is there any calculated fraud here or was he just vastly overly optimistic?

... but even if there is no calculated fraud, I think some Tesla buyers are owed refunds or other compensation. If a company promises me X, I pay for it, and years later has not delivered X, eventually I need a refund.

jcranmer4• 2 years ago

Musk, by contrast, never claimed to have something that he did not have.

IIRC, wasn't the video that claimed to demonstrate a full trip conducted by FSD actually like 100 different splices? That right there would be a claim of something that didn't exist.

uberdru2• 2 years ago

It's about revenue recognition. TSLA has beaten estimates multiple times based on revenue recognized from FSD "Beta". There's your fraud.

malfist2• 2 years ago

Theranos claimed to already have created their magic machine, which was a blatant lie.

And to this day, you can go on Tesla's website, configure a car, and be offered the option to purchase "Full Self Driving Capability" which does not offer a fully self driving vehicle.

windexh8er4• 2 years ago

By this reasoning it would be OK for a car company to market a car with an automatic transmission, yet the clutch was still required to be used on gear changes at delivery. You paid a large premium for the automatic clutch as was marketed by the CEO of the company to be delivered "next year". This claim you bought into was now made over 8 years ago and what the CEO stated has still not been delivered. Your car now has over 120k miles on it with a feature that is only half delivered.

You wouldn't consider this a fraudulent claim?

Sparyjerry7• 2 years ago

We're actually seeing how much people can read into words too much. There was zero promise by Musk just some guesses and when you buy the car itself it has all sorts of lack of promises.

animex• 2 years ago

Absolutely. If Martha Stewart went to jail for much less, a certain CEO[1] should be doing some hard time for ludicrous claims over the past 8 years. Some back-of-the-napkin-math: If we focus on the 4m Model 3 (& Y) vehicles sold that had these claims attached and assume that there was a peak uptake rate of 46% declining to 11% as these claims became obviously untrue. On FSD @ an ever-increasing price of $6000-$12000 USD per vehicle. Let's say take the declining rate difference as indicative of the group that was misled. 35% of those taking FSD took the feature because of erroneous claims, generating about 2Bn in high-margin revenue collected pumping the stock and causing investors to pile on creating even more validation of this claim. Pumping the stock also created massive tranche payouts for Musk for hitting certain valuations that should only have been hit when the automaker was truly a runaway success. Musk is incentivized to use this reality-distortion field & cult-like persona to continue lying about Tesla's future for personal and corporate gain.

[1] Edit: Founder -> CEO

_akhe9• 2 years ago

I agree 100% he should be prosecuted at this point. He should have been the first time.

deegles• 2 years ago

This could have been avoided just by calling it "Partial Self Driving" and then everything would be above board.

dawnerd• 2 years ago

That’s only part of the problem. They’re specifically investigating claims Elon made himself where he said the car drove itself without human input. He’s repeatedly made claims like this.

mensetmanusman2• 2 years ago

That’s what they call it in the aerospace industry /s

tromp• 2 years ago

Or "Fool's Self Driving" to preserve the pronunciation:-)

api3• 2 years ago

It's advanced cruise control, basically, and if advertised as such it'd be great.

itsoktocry7• 2 years ago

A certain founder should be doing some hard time for ludicrous claims over the past 8 years.

I don't think "hard time" is appropriate for white collar crimes. Money is how you speak to these people. Martha Stewart is still worth hundreds of millions of dollars.

ericmay• 2 years ago

I'm not sure Martha Stewart actually did "hard time" - she spent what, a few months in jail? Try 10-20 years.

I'm also not arguing for against jail time for white collar crimes, just disputing that she specifically did hard time. Maybe the FTX guy or Enron guys are more appropriate for a comparison.

ornornor2• 2 years ago

What’s money when you have billions? Isn’t jail worse then? I’d be prepared to pay a very large amount if it meant I could avoid going to jail. There is a much much much smaller amount (if any) of jail I’d accept in return for money.

api3• 2 years ago

Force those responsible to eat the cost of providing partial refunds to people who bought full self drive based on false claims.

tyree7312• 2 years ago

Strongly disagree with both claims. Fraud of a sufficient degree causes harm at a scale that is equivalent (in economic terms at least) to the consequences of murder. And jail time absolutely speaks to wealthy people, given the amount of money and effort wealthy people will spend defending themselves to avoid it.

philosopher1234• 2 years ago

Hard time seems much more severe than fines and penalties, and the damages caused are much more severe than petty theft (which gets you jail time.) it seems totally appropriate to jail these people to me.

Zigurd• 2 years ago

The size of white collar crimes, measured in financial damage, and the large number of victims of many white collar crimes, not to mention the damage to the economy, institutional reputation, etc. makes a car theft ring that would get 10 years look like piffle.

LeifCarrotson• 2 years ago

Hard time costs humans the same amount whether they're rich or poor - insofar as the justice system is equally accessible and you can't just lawyer your way out if wealthy or get screwed by a disinterested public defender if poor, of course.

Money is amoral. It quickly becomes a calculation of ROI to violate the law. We've been reluctant for some reason to index fines against the wealth of the offender, but what would be a ruinous fine for a poor person is irrelevant to a wealthy person (eg. $1000 gag order violations). Also, the wheels of justice turn inexorably but slowly, and if first-to-market matters a lot with new there may be no fine that could restore things to the way it should have been if everyone acted within the law.

rtkwe3• 2 years ago

The issue is the fines aren't a big deterrence as they're not that big. A lot of fines are less than the money the company made or saved with the illicit activity so it just becomes a line item cost more than an actual penalty.

bee_rider• 2 years ago

If someone steals something, taking the thing they stole back is of course the first step.

Other than that, the next step depends on what you think the point of the court/prison system is. If the point of the system is to prevent criminals from harming people: white collar criminals do crime at scale. They can hurt many more people than blue collar criminals.

If the point is to reform people, it seems like white collar criminals have an easier time lying to themselves and justifying their actions, because they don’t physically take things from people, it’s all very abstract. So that seems like a harder project that might take longer.

If the point is to prevent others from following their example, there are lots of reasons to punish white collar criminals more harshly. Their crimes are more difficult to work out, so getting caught might be harder. Plus there’s less of a de-facto preventative aspect—with blue collar crimes, depending on the crime, there’s likely a chance the victim might be physically present and quite irate, so they might fight, potentially even kill, the culprit.

Of course there are some reasons that blue collar crimes can be more serious (muggers might physically hurt somebody). But I don’t think hard time is inappropriate in either case.

throwtappedmac• 2 years ago

I think Martha Stewart went to jail for insider trading idk how similar that is. With OTA updates still could claim this could happen.

This imo is less than both Theranos and insider trading like the FSD has disclaimers right? Unless the argument is Tesla is only valuable because of FSD and not best in class EV experience

The pay package being declined by a Delaware court and now this couldnt have come at a worse time for Musk though. Billionaires got their problems too huh

JumpCrisscross6• 2 years ago

Martha Stewart went to jail for insider trading

"Stewart was found guilty on charges including conspiracy and obstruction of justice" [1]. She sold shares on inside information. She went to jail for lying to investigators about it.

[1] https://people.com/martha-stewart-fraud-case-prison-sentence...

FireBeyond2• 2 years ago

Unless the argument is Tesla is only valuable because of FSD

Not specifically that, but Musk has stated that he sees Tesla as a software company.

dragonwriter• 2 years ago

Unless the argument is Tesla is only valuable because of FSD

That's not how fraud works. Fraud doesn't require that the false claim us the only source of value of the product, it only requires that the false claim is material to the decision to purchase the product at the price offered.

snarf21• 2 years ago

We all need to remember Musk wasn't the founder. He was an early investor that forced the founders out. We can argue about whether the founders would have been more/less successful but he didn't found Tesla.

[https://www.theverge.com/23815634/tesla-elon-musk-origin-fou...]

_akhe9• 2 years ago

Elon "take-n-tank" Musk the brand destroyer lol

I have an even funnier one for you: That viral video of when he was bald and bought that very expensive McLaren... "It's the highlight of my life" he said shortly before totaling the car with no insurance.

"He's a genius!"

perihelions• 2 years ago

- "The investigation, which was first reported in October 2022 but has been going on since at least late 2021, involves federal prosecutors in Washington and San Francisco who..."

Just to clarify, this is the same one as this HN thread from October 2022,

https://news.ycombinator.com/item?id=33348388 ("Tesla faces U.S. criminal probe over self-driving claims (reuters.com)", 469 comments)

bilsbie• 2 years ago

The latest self driving is getting really good. My main problem is being a front seat driver and taking action because I’m not sure of it’s thought process but it ends up getting things correct.

I think all these systems* could benefit from earlier braking to give the “supervisor” more piece of mind.

* including my wife in this.

misiti37802• 2 years ago

agree, half the people in this thread havnt used it. i think it's probably clear to most FSD testers that end-to-end NN trained on video will get you L5 eventually.

ceejayoz7• 2 years ago

I've used it (this weekend, in fact). It's very impressive.

It remains a far cry from this, which Musk tweeted (https://twitter.com/elonmusk/status/686279251293777920) eight years ago:

In ~2 years, summon should work anywhere connected by land & not blocked by borders, eg you're in LA and the car is in NY.

adrr4• 2 years ago

I have it. I don’t know how it can be L5 when the cameras get blinded by the sun in the morning and evening. Or when it rains too hard.

It also picked up the mannerisms of human drivers like hitting the brakes at a yellow light and then accelerating and in my case tried to run a red.

itsoktocry7• 2 years ago

will get you L5 eventually.

"Eventually" wasn't the sales pitch.

Is FSD an awesome technology? Yes. But I've watched enough YouTube videos of it, including by superfans, that I know if you set the navigation and climbed in the back seat, that car is not making it to its destination without getting in an accident.

That's why the safety vs no FSD comparisons are so silly: you have a person intervening. How would it look if you didn't? Guess we'll find out!

IshKebab• 2 years ago

I'm surprised it's taken this long, though I supposed you needed some technical knowledge to know that it was obviously a fraud a while ago. Without that you might believe it was actually possible (hence people actually buying FSD).

klodolph• 2 years ago

“Everything everywhere is securities fraud”

—Matt Levine

https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

The basic idea here is that you lied, the share price went up because of your lies, and that makes it security fraud. From one viewpoint it’s a useful tool to punish fraudsters and con men, and from another view it’s an overreach by the FTC. Maybe a more reasonable view is somewhere in the middle—it’s both a good tool and an overreach.

malfist2• 2 years ago

How is it possibly overreach? If you lie to investors to get them to give you more money, that is absolutely fraud.

mensetmanusman2• 2 years ago

Fly by wire fraud?

ryandrake• 2 years ago

This site[1], which is a pretty comprehensive list of claims Musk has made and how long it’s been, made the rounds on HN a few times. It’s really incredible how much exaggeration comes out of the guy’s mouth. I don’t think it all counts as fraud, but at some point you gotta say Dude, Stop Talking.

1: https://elonmusk.today/

bagels3• 2 years ago

I was trying to find the same thing to post. Thank you!

kemotep• 2 years ago

Last month he stood before the SpaceX staff in Boca Chica and outlined how he still believes that he will get 1 million people on Mars by the 2050s. U til they can start producing 100’s of Starships, this is not even remotely realistic. Sending thousands of people to Mars in the next 5 years is not a serious or realistic idea.

TheLoafOfBread• 2 years ago

I mean, what those 1 million people would be even doing there? What would be their purpose there? Definitely not resources, because getting anything from Mars would not be economical.

I do understand to have an international base of few dozens to few hundred scientists on Mars who will be studying it 24/7. But that's about it.

ChrisArchitect• 2 years ago

[dupe]

Actual article: https://www.reuters.com/business/autos-transportation/tesla-...

(https://news.ycombinator.com/item?id=40297126)

bigtex• 2 years ago

This means the stock goes up 10%, right?

Tesla is being investigated for securities and wire fraud for self-driving claim

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