A US financial regulator has filed a lawsuit against Elon Musk, accusing him of failing to disclose his ownership of Twitter stock and subsequently acquiring shares at “artificially low prices,” to the detriment of other shareholders.
The Securities and Exchange Commission (SEC) initiated the lawsuit late Tuesday in federal court in Washington, DC, citing alleged violations of securities laws.
The SEC claims that Musk did not promptly disclose that he had acquired a 5% stake in Twitter, which allowed him to “underpay by at least $150 million” for shares he bought after the deadline for filing his financial ownership report had passed.
Musk purchased Twitter in 2022 for $44 billion and later rebranded the platform as X. Prior to this acquisition, Musk bought a 5% stake in the company, which typically requires a public disclosure. The SEC contends that Musk did not disclose his ownership until 11 days after the required filing date.
In response to the lawsuit, Musk’s lawyer, Alex Spiro, issued a statement asserting that the SEC’s action was a clear admission that the agency had no valid case. Spiro further stated that Musk “has done nothing wrong and everyone sees this sham for what it is.”
This is not the first time the SEC has investigated Musk’s involvement with Twitter. In 2021, the agency launched an inquiry into Musk and his brother, Kimbal Musk, over allegations of securities fraud and insider trading violations related to the sale of tens of thousands of Tesla shares. Musk is the CEO of Tesla, while his brother is on its board of directors.
Spiro suggested that the SEC lawsuit stemmed from an alleged administrative oversight involving a “single form” and characterized it as part of the agency’s “multi-year campaign of harassment” against Musk. He further dismissed the case as a “single-count ticky-tack complaint.”
Over the past few months, Musk has developed a close relationship with former President Donald Trump. Musk has donated millions to Trump’s re-election campaign and campaigned alongside him.
Trump later appointed Musk to head an advisory group he plans to establish, called the “department of government efficiency,” which would oversee government regulations and spending.
According to the SEC’s lawsuit, before Musk eventually disclosed his stake in Twitter, he allegedly spent over $500 million purchasing additional shares in the company. These purchases allowed him to acquire stock from the “unsuspecting public at artificially low prices.”
When Musk disclosed his ownership to the SEC 11 days after the deadline, he revealed that he had acquired more than 9% of Twitter’s stock.
The SEC noted that on the day Musk made his disclosure, Twitter’s stock price surged by more than 27% compared to the previous day’s closing price.