US securities regulators sued Elon Musk in federal court in Washington on Tuesday in an enforcement action arising from his $44 billion purchase of Twitter, now called X.
The lawsuit against Musk, who has become a close adviser to President-elect Donald Trump, is likely to be one of the more contentious final acts of the Securities and Exchange Commission under Gary Gensler, its departing chairman. It could also be undercut in just a few days, when Mr Trump appoints new leadership to take charge of the regulator.
The SEC contends that in buying Twitter in 2022, Mr Musk violated securities laws by amassing a large stock position in the social media company without filing the proper notification. The complaint said he had waited 11 days before filing the required disclosure with the SEC.
According to SEC rules, investors whose holdings surpass 5 per cent have 10 days to report that they have crossed that threshold. Mr Musk did so 21 days after the purchase, the filing says.
The regulatory filings are required so investors in the marketplace can monitor the moves of large investors and potential takeover bids.
Because Mr Musk did not disclose his position, he was able to continue buying Twitter stock at an artificially low price, the SEC said in its lawsuit. The move “allowed him to underpay by at least $150 million” for the additional shares before he belatedly disclosed his stake, the lawsuit continued.
Over the past few weeks, Mr Musk had taunted the SEC in posts on X about the potential for filing a lawsuit. In December, he shared a letter that his lawyer, Alex Spiro, had sent to the agency, rejecting a settlement offer in the case.
On Tuesday, Mr Spiro denounced the SEC’s latest filing.
“Today’s action is an admission by the SEC that they cannot bring an actual case, because Mr Musk has done nothing wrong and everyone sees this sham for what it is,” Mr Spiro said in a statement.
With Mr Gensler stepping down with the inauguration of Mr Trump on Monday, it is unclear whether incoming regulators will pursue the litigation. Mr Trump has said he intends to nominate Paul Atkins, a former SEC commissioner and pro-business conservative, to succeed Mr Gensler. – This article originally appeared in The New York Times.
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