SEC sues Musk for failing to disclose Twitter ownership

The SEC filed a lawsuit against Elon Musk on Tuesday, accusing the billionaire of committing securities fraud in 2022 by failing to disclose that he had developed an active stake in Twitter, a secrecy that allowed him to Buying stocks at “artificially low prices”.

Musk, who is also CEO of Tesla and SpaceX, bought Twitter for $44 billion in late 2022 and changed the name to X the following year. Before the acquisition, he had built a stake of more than 5% in the company, according to a disclosure his involvement with the public would have been necessary.

According to the SEC’s civil lawsuit filed in U.S. District Court in Washington, D.C., Musk withheld this material information, “which allowed him to underpay at least $150 million for shares he acquired after his report was due.” acquired through the financial beneficial owner.”

The SEC had been investigating whether Musk or someone else who worked with him committed securities fraud in 2022, when the Tesla CEO sold shares in his car company and increased his stake in Twitter before his leveraged buyout. Musk said in a post last month

Musk’s attorney, Alex Spiro, said in an emailed statement that the lawsuit was an admission by the SEC that “it cannot make a factual case.” He added that Musk “did nothing wrong” and called the lawsuit a “sham” and the result of a “multi-year campaign of harassment” that culminated in a “single accuser ticky-tak complaint.”

Musk is just a week away from taking on a potentially influential role in government as President-elect Donald Trump’s second term begins on January 20. Musk, who was a major Trump donor in the latter stages of the campaign, is poised to lead an advisory group that will focus in part on reducing regulations, including those affecting Musk’s various companies.

In July, Trump promised to fire SEC Chairman Gary Gensler. After Trump’s election victory, Gensler announced that he would instead resign from his position.

In a separate civil lawsuit over the Twitter deal, the Oklahoma Firefighters Pension and Retirement System sued Musk, accusing him of intentionally concealing his progressive investments in the social network and intention to buy the company. The pension fund’s lawyers argued that by failing to disclose his investments, Musk influenced the decisions of other shareholders and disadvantaged them.

The SEC said Musk exceeded the 5% ownership threshold in March 2022 and was required to disclose his holdings by March 24.

“On April 4, 2022, eleven days after filing a report, Musk finally publicly disclosed his beneficial ownership in a filing with the SEC and disclosed that he had acquired over nine percent of Twitter’s outstanding shares,” it said Complaint. “On that day, Twitter’s stock price increased more than 27% from the previous day’s closing price.”

The SEC alleges that Musk spent over $500 million to purchase additional Twitter shares in the period between the required disclosure and the date of his actual filing. This enabled him to buy shares from the “ignorant public” at artificially low prices, the lawsuit says. According to the SEC, he “underpaid” Twitter shareholders by over $150 million during that period.

In the lawsuit, the SEC is demanding a jury trial and that Musk be forced to “pay the disgorgement of his unjust enrichment” as well as a civil penalty.

For a brief period in April 2022, after his ownership was revealed and it was revealed that he was the largest shareholder, Musk was expected to join Twitter’s board. However, he quickly abandoned this plan and informed the board that he would not be taking a seat.

What followed was a six-month drama that began with Musk submitting an unsolicited offer in mid-April that was rejected by the board. Twitter’s board finally accepted Musk’s offer later that month. Soon after, Musk tried to backtrack, claiming that Twitter had misreported the number of “bots” on its service

Musk finally closed the deal in October 2022, when he walked into the company’s San Francisco office with a sink in hand.

“Entering Twitter HQ – take it in!” Musk wroteattach a video of his performance.

This story is developing.