Billionaire Elon Musk Faces Securities Fraud Lawsuit
Allegations of Concealing Twitter Ownership and Underpaying Shareholders
The Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, accusing the billionaire of committing securities fraud in 2022. According to the complaint, Musk failed to disclose his ownership in Twitter, allowing him to purchase shares at artificially low prices and underpay shareholders by at least $150 million.
Musk’s Failure to Disclose Ownership
Musk, CEO of Tesla and SpaceX, purchased Twitter for $44 billion and later changed the name of the social network to X. Prior to the acquisition, he built up a position in the company of greater than 5%, which would have required disclosing his holding to the public. However, Musk withheld this material information, allowing him to underpay for shares he purchased after his financial beneficial ownership report was due.
SEC Investigation and Lawsuit
The SEC had been investigating whether Musk, or anyone else working with him, committed securities fraud in 2022 as the Tesla CEO sold shares in his car company and shored up his stake in Twitter ahead of his leveraged buyout. The lawsuit, filed in U.S. District Court in Washington, D.C., alleges that Musk’s actions constituted securities fraud and seeks a jury trial, disgorgement of his unjust enrichment, and a civil penalty.
Musk’s Response and Denial
Musk’s lawyer, Alex Spiro, has denied the allegations, calling the lawsuit a “sham” and the result of a “multi-year campaign of harassment.” Musk himself has stated that the SEC issued a “settlement demand,” pressuring him to agree to a deal including a fine within 48 hours or “face charges on numerous counts” regarding the purchase of shares.
Potential Consequences and Implications
The lawsuit comes at a critical time, as Musk is poised to lead an advisory group that will focus on reducing regulations, including those that affect his various companies. The outcome of the lawsuit could have significant implications for Musk’s business empire and his role in government.
Separate Civil Lawsuit
In a separate civil lawsuit, the Oklahoma Firefighters Pension and Retirement System has sued Musk, accusing him of deliberately concealing his progressive investments in Twitter and intent to buy the company. The pension fund’s attorneys argue that Musk’s actions influenced other shareholders’ decisions and put them at a disadvantage.
Leave a Reply