S.E.C. SEC Sues Elon Musk for Twitter-Related Securities Infractions
U.S. The lawsuit against Mr. Musk is likely to be the most controversial act of the Securities and Exchange Commission’s departing chairman Gary Gensler. It could also be undercut in just a few days, when Mr. Trump appoints new leadership to take charge of the regulator.
The S.E.C. The complaint said that he waited 11 days before filing the required disclosure with the S.E.C. The complaint stated that he waited 11 full days before filing with the S.E.C. the required disclosure. In its lawsuit, the S.E.C. stated that Mr. Musk’s failure to disclose his position allowed him to continue buying Twitter stock at an artificially low price. The move “allowed him to underpay by at least $150 million” for the additional shares before he belatedly disclosed his stake, the lawsuit continued.
Over the past few weeks, Mr. Musk had taunted the S.E.C. In posts on X, Mr. Musk hinted at the possibility of filing a lawsuit. In December, he shared a letter that his lawyer, Alex Spiro, had sent to the agency, rejecting a settlement offer in the case.
On Tuesday, Mr. Spiro denounced the regulator’s latest filing.
“Today’s action is an admission by the S.E.C. The SEC cannot bring a case because Mr. Musk did nothing wrong, and everyone knows this is a sham,” Mr. Spiro stated in a press release. The agency had waged “a multiyear campaign of harassing” Mr. Musk, but filed “a one-count ticky tack complaint”, Mr. Spiro said. The S.E.C. has taken Mr. Musk to court three times. The first lawsuit, during Mr. Trump’s first term in office, arose from inappropriate market-moving posts on social media in which Mr. Musk mused about taking his electric car company, Tesla, private.
Before filing the lawsuit on Tuesday, the S.E.C. had also sought to force Mr. Musk to comply with a subpoena seeking to take his deposition.
With Mr. Gensler stepping down with the inauguration of Mr. Trump on Monday, it is unclear whether incoming regulators will pursue the litigation. Paul Atkins, former S.E.C. commissioner and pro-business conservative, is expected to succeed Mr. Gensler. commissioner and pro-business conservative, to succeed Mr. Gensler.
Daniel Richman, a professor at Columbia Law School who specializes in criminal law, said the lawsuit appeared to be part of a pattern of matters being filed by Biden administration appointees “on their way out.”
It will be up to the new administration and Mr. Trump’s appointees to decide whether to “back off and withdraw” cases like the one against Mr. Musk, he said.
The S.E.C. The Consumer Financial Protection Bureau and the SEC have filed a number of lawsuits during the last days of the Biden Administration. As with the case against Mr. Musk, it is unclear how these last-minute actions will fare under the new administration.
Dennis Kelleher, chief executive of Better Markets, a nonprofit group that pushes for more transparency on Wall Street, said the timing of the lawsuit might have been dictated by Mr. Musk’s resistance to the S.E.C.’s effort to take a deposition. Mr. Kelleher said most cases like this would be settled with the defendant’s paying a fine and neither admitting nor denying liability.
The S.E.C., he said, is sending a message that “billionaires who engage in litigation warfare are going to comply with the law like every other American.”
Still, the S.E.C. did not go out of its way to trumpet the lawsuit.
Regulators filed it on Tuesday after the close of business on the East Coast without the usual fanfare associated with a big case. The news release announcing the filing did not include a quote from Mr. Gensler or any other top official with the agency — a rarity for an action against a high-profile businessperson.
It was an indication that regulators might be worried about the optics of going after the richest person on the planet, who is also a close adviser to the president-elect, less than a week before Inauguration Day.
Mr. Musk has been at Mr. Trump’s right side almost every single day since the election. He is living all but full time at Mr. Trump’s Mar-a-Lago residence and club in Florida, and attending meetings and events with the president-elect.
Mr. Trump appointed Mr. Musk to co-chair a government task force to find ways to reduce the federal budget. The S.E.C. has been investigating Mr. Musk since April 2022, when he announced that he owned a controlling interest in Twitter. Musk began buying Twitter stock at the end of January 2022. According to the regulator’s suit, in February, the broker who was managing his share purchases told the billionaire’s financial advisor that Mr. Musk needed legal advice before disclosing his holdings. Mr. Musk reached the 5 percent threshold in mid-March. This is the point at which a public disclosure becomes mandatory. In its complaint, the S.E.C. stated that Mr. Musk’s position increased Twitter’s stock by more than 27 percent after he announced it. After he announced his position, Twitter’s stock shot up more than 27 percent.
Although Mr. Musk initially said in an S.E.C. Musk initially stated in an S.E.C. disclosure that he intended to be a passive investor in Twitter. However, he quickly changed his mind and made a $44 billion offer to purchase it outright. In July 2022 he tried to backout of the purchase but the company sued him to force it through. Mr. Musk bought the company in October of that year, and changed its name to X.
The S.E.C. The SEC has been fighting Mr. Musk in order to force his testimony. In October 2023 the agency sued Musk in an attempt to force him testify about his shares purchases. Musk was called to testify a year after the lawsuit. The billionaire agreed to pay S.E.C. almost $3,000 in compensation. for travel costs it incurred in sending its employees to take his testimony.
But in November, a federal judge in San Francisco denied the S.E.C.’s request to impose sanctions on Mr. Musk. Musk then taunted SEC with a crude joke in a post the next day on X. The federal authorities have been investigating and suing Musk for his takeover of Twitter. The Federal Trade Commission investigated whether X had the resources to protect users’ privacy after he laid off much of its staff and after several senior executives responsible for privacy and security resigned.
That agency has also sought to depose Mr. Musk. Former Twitter shareholders have also sued Mr. Musk, accusing him of fraud in a case related to his belated disclosure of his stake in the company.
Alain Delaqueriere contributed research.
