The Securities and Exchange Commission filed a lawsuit against Elon Musk on Tuesday for an alleged securities violation related to his acquisition of Twitter, now called X.
The SEC alleges that Musk failed to disclose his 5% ownership stake in Twitter in a timely manner, in violation of federal securities law, according to a complaint filed in federal court in Washington, DC. The SEC alleges that Musk waited to disclose the purchase in order to create a larger position in Twitter at a discounted price.
The lawsuit comes during Gary Gensler’s last week as chairman of the SEC, before he steps down on January 20. Gensler and Musk have had several spats over the past four years, including just last month when Musk scoffed at a settlement offer from the SEC’s office at X. Still, Musk could face a friendlier SEC commissioner in just a few week when Trump’s nominee takes office.
The SEC complaint says Musk disclosed his Twitter purchase 11 days late. After purchasing more than 5% of Twitter – which Musk allegedly did on March 24, 2022 – he was required by the SEC to file a beneficial ownership report. He submitted the report on April 4, 2022, according to the SEC complaint.
During this late disclosure period, Musk allegedly increased his position in Twitter from a 5% stake to a 9% stake. On the day Musk disclosed his purchase to the SEC, Twitter’s stock price rose 27% over the previous day’s closing price. The SEC alleges that this allowed Musk to underpay for his Twitter stake by more than $150 million.
In its complaint, the SEC proposed that Musk return the ill-gotten gains and pay an additional civil penalty. Ultimately, a federal court will decide whether the SEC’s claims have merit and determine whether Musk should be fined.
Musk’s lawyer, Alex Spiro, called the complaint an “admission” that the SEC cannot bring a “current case,” in a statement to Bloomberg on Tuesday.
“As the SEC steps back and forth, the SEC’s years-long campaign of harassment against Mr. Musk culminated in the filing of a single complaint against Mr. Musk,” Spiro told Bloomberg.
In a December post on X, Musk shared a letter from Spiro that touched on similar notes, also referring to “years of harassment” by the SEC. That letter rejected a settlement offer from the SEC in this case.
To fill Gensler’s role, President-elect Donald Trump appointed Paul Atkins, who served as SEC Commissioner during the Bush administration and is expected to be friendlier to Trump allies. These days, Musk is about as close to Trump as anyone, and the X owner could face a different regulatory regime in just a few weeks.
