Tesla Inc.  (TSLA - Get Report)  shares plunged 12% Friday as investors reacted a move by the U.S. Securities and Exchange Commission to oust billionaire founder and CEO Elon Musk amid charges of fraud.

The SEC said Musk made "false and misleading" statements on August 7 when he told his 22.7 million Twitter followers that he had "funding secured" to take the clean-energy carmaker private at a price of $420 per share, a figure officials alleged in court papers filed in Manhattan was a slang reference to marijuana. The SEC is seeking to remove Musk from his role as Tesla CEO and bar him from serving in a similar capacity at any other U.S. company. It's also seeking the return of "any ill-gotten gains" from the Tweet and an undisclosed civil fine.

"This unjustified action by the SEC leaves me deeply saddened and disappointed," Musk replied in a statement. "Integrity is the most important value in my life and the facts will show I never compromised this in any way."

"Musk's statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock's then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote," the SEC said.

Am considering taking Tesla private at $420. Funding secured.

— Elon Musk (@elonmusk) August 7, 2018

The Wall Street Journal reported that the SEC action followed a failed attempt by the agency to broker a deal with Musk, who was advised by his legal team to reject the offer.

Tesla, for its part, stood by its beleaguered leader, saying late Thursday that it is "fully confident" in Musk and that the company and the board are focused on the continued acceleration of Model 3 production and deliveries. 

JPMorgan issued a note on Tesla Friday that said Musk's continued involvement as an officer of the firm was crucial to its success, and said increasing questions over his fate could harm the company's ability to raise capital on "amenable" terms.  Bob Lutz, a former General Motors (GM - Get Report) executive and a long-time Tesla critic, told CNBC Tesla would likely be unable to raise new capital if it were under an active SEC investigation.

Tesla $920 million convertible bond matures March 1, 2019. If stock below $359 conversion price then $TSLA pays $920 million. Strong motivation to make materially misleading claims about production, profitability & buyout funding for a company with liquidity issues pic.twitter.com/4Fac5sIBKy

— J Pierpont Morgan (@pierpont_morgan) September 28, 2018

Musk sent the now-infamous Tweet at 12:48 pm eastern time on August 7, causing the stock to immediately spike 6% to an all-time high of $387.46 each. However, given the lack of detail in the communication, and subsequent statements from Musk himself, the stock has decline sharply since then as investors questioned not only Musk's preferred form of communication but also a series of increasingly troubling actions from the 47 year old billionaire and some high-profile departures from Tesla's management team..

In fact, Musk's public behaviour since the August Tweet has raised serious questions over his ability to run a public company, with the billionaire founder himself telling the New York Times last month that the past year has been the "most difficult and painful" of his career.

Since that interview, however, Musk has courted controversy -- and added to his increasingly active legal calendar -- by reviving a spat with Vernon Unsworth, a British diver who was part of the rescue team that extracted twelve Thai boys from a local football team, along with their coach, trapped in a cave beneath the Doi Nang Non mountain on the border of Myanmar.

"He's an old, single white guy from England who's been travelling to or living in Thailand for 30 to 40 years, mostly Pattaya Beach, until moving to Chiang Rai for a child bride who was about 12 years old at the time," Musk told Buzzfeed in an email earlier this week in which he referred to Unsworth as 'child rapist'. "There's only one reason people go to Pattaya Beach," Musk allegedly told Buzzfeed.

"The man that created tens of billions in market capitalization for an unprofitable enterprise through sheer salesmanship is going further and further down a road that will destroy it," wrote Real Money contributor David Butler. "With each tweet, every absurd statement, every promise that cannot be kept, Musk is destroying the credibility that Tesla so desperately needs in order to succeed."