CNBC's Jim Cramer on Wednesday said he thinks a federal judge should put a "special master" on Tesla's board of directors to make CEO Elon Musk comply with a court-approved deal between him and the Securities and Exchange Commission.
Musk has been under pressure for his practice of relaying important business information about Tesla through Twitter.
"At this stage, I think a special master would be a win for shareholders. Everything else a loss," the "Mad Money" host said. "However, it's not Judge Nathan's job to protect Tesla's stock, it's her job to protect the justice system."
As alternatives, Cramer suggested that U.S. District Judge Alison Nathan of the Southern District of New York either remove the co-founder as chief or send him to prison for violating the agreement.
"She can remove Musk from the CEO job—he can't mislead investors about Tesla if he's no longer speaking for Tesla," Cramer said. "She could make the violation criminal and actually sentence him to prison. That's a hard call, but, to be honest, Musk is practically begging her to throw the book at him."
Musk has not attempted to get any Tesla-related tweets to his 24 million-plus followers approved, including one in February that said the electric vehicle manufacturer would produce about 500,000 cars in 2019, the SEC said. Musk later corrected the tweet saying that there would be about 400,000 deliveries this year.
Near the end of February, Musk said in a tweet that "something is broken with SEC oversight." Lawyers for the CEO have accused the SEC for overreach and infringing on Musk's First Amendment rights for seeking to hold him in contempt of court.
Cramer called it "the most absurd argument I've ever heard" and said Musk could be "in real trouble here."
"If the SEC's allegations are true, then he's basically spitting in the justice system's face ... [and Judge Nathan] can't just let him violate a court order and get away with it. The whole system would unravel, for heaven's sake."
Judge Nathan is "boxed in" since fining Musk $20 million and cannot rely on Tesla's board to rein Musk in, Cramer said. The matter stems from an August tweet by Musk that shocked the market saying "funding secured" to take the company private.
Shares of Tesla traded up/down ___ percent in Tuesday's session. The stock is down 18 percent this year and about 12 percent in the past year.
"Unless you relish the idea of Tesla without Musk at the helm, I don't know why you would want to buy [the] stock here," the host said.
"I think the guy is a genius ... and a huge success in a business with little growth, but I just don't think he can weasel his way out of this one."
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