Elon Musk hit with SEC lawsuit over Twitter shares
US regulators accuse the billionaire of withholding key financial information, impacting market fairness
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that he misled Twitter shareholders by delaying the disclosure of his growing stake in the company before launching his $44 billion takeover bid in 2022.
The complaint, filed in federal court in Washington, D.C., claims Musk waited 11 days past the legal deadline to report that he had acquired more than 5% of Twitter's stock. This delay, according to the SEC, allowed Musk to buy additional shares at lower prices, ultimately depriving shareholders of more than $150 million in potential profits. Disclosure rules are designed to ensure the market is aware of large investments and potential takeovers.
The timing of the lawsuit is significant, as it comes just days before President-elect Donald Trump is set to take office and appoint new SEC leadership. Musk has recently become a close advisor to Trump, collaborating with entrepreneur Vivek Ramaswamy on a government cost-cutting initiative and participating in meetings with foreign officials alongside the president-elect.
The SEC alleges that by delaying the disclosure, Musk bought shares from the public at "artificially low prices," causing financial harm to those who sold during that period. The agency is seeking financial penalties and the return of profits it claims Musk unfairly gained.
Ongoing tensions
Alex Spiro, a lawyer representing Musk, has dismissed the lawsuit, calling it "an admission" that the SEC lacks a strong case. He described the complaint as a minor technical issue regarding a delayed filing of a disclosure form, arguing that similar cases have typically resulted in penalties of $100,000 or less. The SEC, however, reportedly requested a settlement of more than $200 million from Musk.
The lawsuit could signal increased regulatory scrutiny not only for traditional markets but also for the cryptocurrency space, where transparency issues and delayed disclosures have been ongoing concerns. Crypto projects and token launches could face heightened attention from regulators if the SEC's stance on financial transparency strengthens through this case.
Past legal disputes
Musk has had past conflicts with the SEC. In 2018, he settled a securities fraud case with the agency after tweeting that he had "funding secured" to take Tesla private. The settlement required Musk to step down as Tesla's chairman and pay a $20 million fine, alongside a requirement for pre-approval of certain social media posts related to Tesla.
The SEC's current lawsuit references how Musk continued buying Twitter stock after exceeding the 5% ownership threshold without proper disclosure, eventually reaching a 9% stake before publicly acknowledging his involvement. The delay, the SEC claims, led to a sharp 27% rise in Twitter's stock price once Musk's stake was revealed.
The case is being closely watched as Musk remains a highly influential figure in both the technology and political spheres. The SEC seeks civil penalties and the return of profits Musk allegedly gained through the delayed disclosure.
