SEC Takes Aim at Elon Musk Over Twitter Share Acquisition
The Securities and Exchange Commission has launched a legal battle against Elon Musk, accusing the billionaire of defrauding Twitter shareholders during his 2022 takeover bid. In a lawsuit filed in a Washington, D.C. federal district court, the SEC alleges that Musk failed to disclose his acquisition of more than 5% of Twitter’s common stock in a timely manner, violating federal securities laws.
Musk’s Late Filing Sparks Controversy
Musk began acquiring Twitter shares in January 2022, and by March 14, his stake had exceeded 5% ownership in the company. However, he missed the SEC’s first filing deadline on March 24 and instead filed a late report on April 4, designating himself as a passive investor. This move sparked a 27% increase in Twitter’s stock price, according to the SEC.
Allegations of Securities Fraud
The SEC alleges that Musk not only disclosed his Twitter position too late but also falsely held himself out as a passive investor, rather than an active investor intending to exert control over the company. By withholding these facts from shareholders, the SEC claims that Musk committed securities fraud. Musk refiled his disclosure as an active investor the next day, but the damage was already done.
A Pattern of Behavior?
This is not the first time Musk has faced scrutiny from the SEC. In 2018, he was targeted over a tweet claiming he had “funding secured” to take Tesla private, leading to an SEC lawsuit that ended in a settlement. The current investigation into Musk’s Twitter share acquisitions and disclosures was launched in April 2022, under the leadership of SEC Chair Gary Gensler.
The Future of the Lawsuit
The outcome of the lawsuit will depend on the will of the SEC under new leadership. Gary Gensler’s term as SEC chair expires on January 20, and President-elect Trump has nominated former SEC Commissioner Paul Atkins to lead the agency. Meanwhile, a Twitter shareholder has also sued Musk over the same disclosures, alleging that his filings with the SEC came six trading days too late.
Musk Fires Back
Musk has responded to the SEC’s allegations, calling the commission a “totally broken organization” on X. His lawyer, Alex Spiro, has rejected the SEC’s offer to settle its Twitter disclosure complaints, calling the lawsuit a “sham” and claiming that Musk did nothing wrong. The SEC is seeking civil penalties and an order for Musk to pay back his “unjust enrichment” as a result of his alleged violation.
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