Elon Musk is being sued by the U.S. Securities and Exchange Commission over his 2022 Twitter takeover.
The agency alleges that the billionaire failed to disclose his ownership of Twitter stock in a timely manner, saving himself at least $150 million “at the expense of shareholders.”
The Tesla and SpaceX CEO acquired Twitter for $44 billion in October 2022 and rebranded it as X.
Musk, the world’s richest man, is just days away from wielding enormous influence and power in the White House when President-elect Donald Trump takes office.
Alongside Vivek Ramaswamy, Musk will lead the newly formed advisory Department of Government Efficiency on a mission to slash federal budgets.
Here’s what to know about the SEC’s civil complaint.
What is the complaint against Musk?
Musk, according to the SEC’s complaint filed in U.S. District Court in Washington, D.C, purchased more than $500 million worth of Twitter stock between March 25, 2022, and April 1, 2022, and owned more than five percent of the company. He was required by law to disclose this information, but failed to do so until April 4, the SEC said.
The agency claimed that investors and the “unsuspecting public” who sold Twitter stock during that period did so “at artificially low prices,” which led them to suffer “substantial economic harm.”
“As alleged, because Musk failed to timely file a beneficial ownership report with the SEC, he was able to make these purchases of Twitter common stock at artificially low prices from the unsuspecting public, who had not yet priced in the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter common stock and investment purpose,” the SEC said in a release.
The civil complaint added that by April 4, when Musk disclosed his ownership in the company, Twitter’s stock price had jumped more than 27 percent.
“On April 4, 2022, eleven days after a report was due, Musk finally publicly disclosed his beneficial ownership in a report with the SEC, disclosing that he had acquired over nine percent of Twitter’s outstanding common stock,” the complaint says. “That day, Twitter’s stock price increased more than 27 percent over its previous day’s closing price.”
The SEC wants Musk to pay a civil fine and give up the profits “of his unjust enrichment.”
Has Musk responded?
Musk hit out at the suit and said the SEC was “broken” in an expletive-laden post on X.
“Totally broken organization,” Musk responded on X on Tuesday. “They spend their time on s*** like this when there are so many actual crimes that go unpunished.”
His lawyer, Alex Spiro, blasted the complaint as a “sham.”
“Mr. Musk has done nothing wrong and everyone sees this sham for what it is,” Spiro said in a statement.
Prior to the SEC’s suit, Musk shared a letter from his lawyer on X that claimed the agency had demanded he settle for $263 million in December.
What will happen next?
Shortly after Trump’s election victory in November, SEC chairman Gary Gensler announced that he would be resigning from his post.
It is not clear if the new administration will continue the lawsuit, but Trump has tapped pro-business Paul Atkins, who previously served as SEC commissioner from 2002 to 2008, to take over.
Musk is likely to ask Atkins to withdraw the case, according to the New York Post.
