Musk’s lawyers claim he did nothing wrong and the lawsuit is a complete farce.
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Elon Musk on Tuesday, accusing the billionaire of alleged securities violations in 2022 for failing to disclose his holdings in Twitter and purchasing shares at “artificially low prices.”
Musk, who is also the CEO of Tesla and SpaceX, bought Twitter for $44 billion and later renamed the social platform X. He was also the CEO of Tesla and SpaceX when he bought the company.
Prior to the acquisition, he owned more than 5 percent of the company, which would have required him to disclose his holdings to the public. According to the SEC’s complaint, Musk withheld this material information, artificially depressing the price of Twitter’s stock and “causing him to underpay by at least $150 million for shares purchased after his financial beneficial ownership report was due.” Only after an 11-day delay did Musk publicly disclose his beneficial ownership in an April 4, 2022 report to the SEC.
On that day, April 4, 2022, Twitter’s stock price rose more than 27% from the previous day’s closing price.
The SEC has been investigating whether Musk or anyone working with him committed securities fraud in 2022, when the Tesla chief executive sold shares in his car company and increased his stake in Twitter before its leveraged buyout. In a post on X last month, Musk said the SEC issued a “settlement demand” that pressured him to agree to a deal that included a fine within 48 hours or “face multiple charges” related to the stock purchases.
Musk’s lawyer said in an emailed statement that the move was an admission by the SEC that “they are unable to bring a real lawsuit”. He added that Musk had “done nothing wrong” and called the lawsuit “a farce” that was the result of “a multi-year harassment campaign” that ended with “an intractable complaint”.
Musk is just a week away from taking on a potentially influential role in the new U.S. administration, as President-elect Donald Trump’s second term begins on January 20th. Musk, who was a major financial backer of Trump’s late campaign, will lead an advisory panel that will focus in part on reducing regulation, including regulation affecting Musk’s companies.
Last July, Trump vowed to fire SEC Chairman Gensler. After Trump won the election, Gensler announced he would resign.
In a separate civil lawsuit over the Twitter deal, the Oklahoma Firefighters Pension Fund also sued Musk, accusing him of willfully concealing his incremental investments in Twitter and his intent to acquire the company. Attorneys for the pension fund argue that Musk’s failure to clearly disclose his investments influenced the decisions of other shareholders and put them at a disadvantage.
