Tesla Autopilot recall probe is looking into possible securities, wire fraud

Authorities want to know if the Elon Musk-led automaker misled customers, investors into believing the cars could actually drive themselves.

May 8, 2024 - 22:30

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Tesla Autopilot recall probe is looking into possible securities, wire fraud

Amid the current firestorm at Tesla (TSLA) that includes multiple rounds of layoffs, the Elon Musk-led electric automaker is facing a new probe by authorities over one of its most controversial technological gizmos.

A member of the media test drives a Tesla Motors Inc. Model S car equipped with Autopilot in Palo Alto, California, U.S.
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As per a May 8 report by Reuters, Tesla is the subject of an investigation led by U.S. prosecutors into whether the electric automaker committed securities or wire fraud by misleading its customers and its investors about the actual capabilities of its Autopilot feature.

Although Tesla has warned drivers that the system that helps with braking, lane changing and steering is not fully autonomous and requires vigilant attention from the person behind the wheel of Autopilot-equipped vehicles, the Justice Department is looking into statements from both the company itself, as well as CEO Elon Musk, that may have led drivers to believe that the cars could drive themselves.

Sources familiar with the matter told Reuters that the investigators are looking at whether Tesla committed wire fraud, as well as securities fraud.

Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp., speaks at the Milken Institute's Global Conference at the Beverly Hilton Hotel, on May 6, 2024 in Beverly Hills, California.
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An act of wire fraud is committed when a person or entity deceives customers in interstate communications, while securities fraud involves the act of misleading investors. Reuters also said that the Securities and Exchange Commission (SEC) is also looking into whether Tesla misrepresented claims in its communications about its Autopilot driver-assist system to investors.

The probe itself does not indicate that Tesla is involved in, or responsible for, any wrongdoing, however it could result in either criminal charges, civil sanctions, or no action in the end. One source told Reuters that prosecutors involved with the Tesla probe are "far from deciding how to proceed," in part due to the massive amount of subpoenaed documents that they will have to sift through.

Tesla's autopilot troubles:

A decal advertising Tesla Motors Inc.'s Autopilot feature sits on a window of their showroom at a dealership, on Oxford Street in London, U.K., on Wednesday.
Bloomberg/Getty Images

The safety of Tesla's Autopilot has also been the target of recent scrutiny from other federal-level officials besides the SEC.

On April 26, the National Highway Traffic Safety Administration (NHTSA) published the results of a nearly three-year probe into the safety of Tesla's Autopilot and Full Self Driving technologies, which found that the software did a bad job of keeping drivers engaged and also found that its name misled drivers into thinking that their Tesla vehicles were in more control than what was reality.

Additionally, on May 6, the NHTSA sent a letter to Tesla asking about the specific changes made to Autopilot following a voluntary recall in December 2023 that affected nearly two million Tesla vehicles in the United States. According to the agency, it found that since the recall late last year, at least 20 Tesla vehicles have been involved in Autopilot-related crashes.

The NHTSA's letter also says that Tesla has a deadline of July 1 to provide the information, or face fines of up to $135.8 million.

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