On Tuesday, the billionaire was accused of committing securities fraud in 2022 for not revealing his ownership in Twitter and buying shares at “artificially low prices.”
For $44 billion, later renaming the social network to X. Before the acquisition, he had accumulated a stake in the company worth over 5%, therefore necessitating public disclosure of his holding.
According to the SEC complaint, filed in a U.S. federal court in Washington, D.C., Musk withheld important information, “letting him end up paying at least $150 million too little for shares he bought after his financial reporting requirement was due.”
In a post on X last month, the SEC threatened a “settlement demand,” requiring him to agree to a deal that included a fine within 48 hours, with the threat of facing charges on numerous counts regarding the purchase of shares.
Musk’s lawyer, Alex Spiro, stated in an e-mail that the action is essentially the SEC’s acknowledgment that they cannot succeed in bringing a case. He added that Musk has not committed any wrongdoing and termed the lawsuit as baseless and the culmination of a continuous three-year campaign of harassment, resulting in a one-point complaint.
Tesla CEO Elon Musk is just a week away from taking on a potentially key role in government, as President-elect Donald Trump prepares to begin his second term on January 20. Musk, who was a significant financial supporter of Trump in the latter stages of the campaign, is set to head up an advisory group that will focus on reducing regulations, including those that affect Musk’s various companies.
In July, Trump promised to fire SEC chairman Gary Gensler. Following Trump’s election victory, Gensler stated that he would be leaving his position.
In a separate civil lawsuit related to the Twitter deal, the Oklahoma Firefighters Pension and Retirement System filed a suit against Musk, claiming he intentionally hid his progressive investments in the social network and his desire to buy out the company. Attorneys for the pension fund argued that Musk’s failure to clearly disclose his investments had an impact on the decisions made by other investors, placing them at a disadvantage.
The SEC stated that Musk exceeded the 5% ownership threshold as of March 2022, and would have been obligated to disclose his holdings by March 24.
On April 4, 2022, eleven days after a report was due, Musk made his beneficial ownership in a report public with the SEC, revealing he had bought more than 9% of Twitter’s outstanding stock, the complaint states. That day, the price of Twitter’s stock went up by more than 27% compared to its closing price the day before.
The SEC claims that Musk invested over $500 million in buying more Twitter shares between the time he needed to disclose the information and actually filing it. This allowed him to buy Twitter stock from the public at lower-than-accurate prices, the complaint claims. He is also accused of paying Twitter shareholders $150 million less than he should have during that period, according to the SEC.
This is a developing story. Please check back for further updates.
