The billionaire gained over $150 million from unsuspecting Twitter shareholders, according to the regulator
Elon Musk is facing a lawsuit from the US Securities and Exchange Commission (SEC) over accusations that he failed to promptly disclose his initial acquisition of a significant stake in Twitter in early 2022, allegedly causing substantial financial harm to investors who sold their shares at lower prices.
The complaint, filed in federal court in Washington DC on Tuesday, asserts that Musk’s stake in Twitter exceeded the 5% threshold on March 24, 2022, which triggered a legal requirement to disclose his ownership within ten days. However, Musk did not file the disclosure until April 4, 2022, during which time he continued acquiring additional shares from investors who sold their holdings without knowing about his growing stake.
The SEC alleges that this delay allowed Musk to buy Twitter shares at artificially low prices, underpaying by more than $150 million. The regulator is seeking the disgorgement of these alleged profits, along with civil penalties.
Musk’s attorney, Alex Spiro, dismissed the lawsuit as baseless, calling it part of a “multiyear campaign of harassment” against Musk.
“This action, focusing on an alleged administrative failure to file a single form, is a sham and an admission by the SEC that they cannot bring an actual case,” Spiro stated.
Musk’s past history with the SEC includes a 2018 settlement over a tweet about taking Tesla private, which resulted in fines and the imposition of oversight on his public communications.
The new legal action comes amid changes in the SEC’s leadership. Outgoing SEC Chair Gary Gensler, who initiated the lawsuit, is set to be succeeded by Paul Atkins, appointed by President-elect Donald Trump. Whether Musk’s close ties to the incoming administration, including his appointment to lead the Department of Government Efficiency (DOGE), will influence the case remains uncertain.
Elon Musk ultimately acquired Twitter in a deal valued at $44 billion. The purchase was finalized on October 27, 2022, after months of legal battles and public disputes, including an initial attempt by Musk to withdraw from the agreement. Following the acquisition, Musk took the company private, implemented major operational changes, and rebranded it as X.