The SEC's lawsuit claims significant investor harm, as Musk allegedly concealed stake details, influencing share prices and benefiting his own investment.
Musk Faces SEC Lawsuit Over Concealed Twitter Stake Acquisition
Musk Faces SEC Lawsuit Over Concealed Twitter Stake Acquisition
US markets watchdog alleges Musk saved $150 million by delaying Twitter ownership disclosure.
The Securities and Exchange Commission (SEC) has initiated legal proceedings against Elon Musk, alleging that the billionaire entrepreneur failed to promptly disclose his accumulation of a significant stake in Twitter, resulting in substantial financial advantages at the expense of other shareholders. The lawsuit, filed in a federal court in Washington D.C. on Tuesday, asserts that Musk's delayed disclosure allowed him to purchase shares at "artificially low prices," ultimately saving him $150 million.
SEC regulations stipulate that investors must declare holdings exceeding 5% within a 10-day period. Nonetheless, Musk reportedly took 21 days to disclose his stake, prompting the SEC to enhance its scrutiny over his actions. In response to the claims, Musk denounced the SEC as a "totally broken organisation," suggesting that they were misallocating resources while ignoring other significant criminal activities.
The SEC emphasizes that Musk's failure to comply with disclosure requirements inflicted considerable economic harm on investors. In a statement to BBC News, Musk's attorney, Alex Spiro, dismissed the lawsuit as a "sham" and an ongoing "campaign of harassment." Notably, following Musk's public announcement regarding his Twitter share acquisition on April 4, 2022, the platform's share price surged by over 27%.
After officially acquiring Twitter for $44 billion in October 2022, Musk rebranded the platform as X. In the course of the lawsuit, the SEC has requested that the court mandate Musk to forfeit what they deem "unjust" profits and impose financial penalties on him.
SEC Chair Gary Gensler recently announced plans to resign if Donald Trump reclaims the presidency on January 20, 2024—an outcome that could result in further changes in regulatory oversight. Musk and Gensler have had a fraught relationship, with Musk previously facing allegations of defrauding investors in 2018, leading to the former settling those charges with the SEC under terms that included stepping down as chairman of Tesla's board.
