It's not. They have to prove intent. Musk didn't make any transactions while the stock was on the rise, so intent (which is hard to prove) and benefit (which can't be proven) are both a huge problem with this case. He deserves the lawsuit, but this is just to force his hand on a deal.

Wrong on two levels.

Intent doesn’t matter here, the SEC is alleging negligence (read the actual complaint). Remember that this is a civil case, not a criminal one.

Second is that he’s being accused of securities fraud, not insider trading. So the SEC doesn’t actually need to prove that he benefited, only that rules were broken.

The SEC is alleging he broke rule 10b-5, which says that the defrauding actions must be "in connection with the purchase or sale of any security".

The SEC complaint doesn't seem to allege negligence at all, in the claim for relief it says 'Defendant, with scienter' which definitely does not imply negligence.

The complaint alleges that the statements were made in connection with the sale of securities but I don't really understand where that comes from.

Anything that effects price is connected with the selling of securities. In fact, his very statement was equivalent to "Buy now, and make an easy $420 per share!", and people did actually purchase the stock.

This is textbook market manipulation.

The other commenter covered the bit about “in connection with the purchase of sale of a security” better than I would.

They absolutely allege negligence.

> As a result, Musk knew or was reckless in not knowing that his August 7 statements were false and misleading.

That’s negligence. This exact phrase is repeated 3 times in the complaint, and is actually in a section title, right before point 68.