Musk's fortune dropped by $1.5 billion Friday in NY, the day after the Securities and Exchange Commission accused the Tesla Inc.
In a lawsuit, the regulator described Musk surprising members of his own team and investors with a series of tweets, starting with the August 7 announcement that he was thinking of taking Tesla private. He has 45 days to relinquish his chairman title. It would require Tesla to appoint two new independent directors.
The fraud case comes amid a squall of disquieting tweets and other troubling disclosures that have raised questions about whether Musk should remain at the helm of Tesla, a company valued at $46 billion.
In a statement to CNBC, Musk called the allegations "unjustified". These complaints are notable because they express numerous same concerns regarding Musk's actions as the SEC's lawsuit, providing a snapshot of the overwhelming frustration felt by small investors with Musk, as well as an overall concern that the American financial system places individuals at a stark disadvantage.
It was claimed Tesla was close to reaching a deal with the SEC before it brought charges against Musk.
Tesla did not immediately reply to CNN's request for comment.
Thomas Gorman, a partner at the law firm Dorsey & Whitney and former SEC senior counsel, said Musk's statements, which he made on Twitter, weren't smart from a business perspective, but that doesn't necessarily mean Musk committed fraud.
Tesla stock plunged 14 percent to $264.77 Friday, wiping out $7.3 billion in shareholder value.
But extracting Musk from the company he has become synonymous with could devastate Tesla.
The coming legal clash will pit the volatile billionaire against a team of federal regulators, who say he manipulated markets and fraudulently misled investors by claiming in a series of tweets that he had secured the funding to take Tesla private. Today's ~14 percent drop was the worst day in Tesla's history since way back in 2013.
"But what has kept Tesla's stock hoisted is the perpetual tweets and promises from Elon Musk, promises that he hasn't met", Johnson said.