SEC Sues Elon Musk Over Alleged Securities Violation Linked To Twitter Purchase

14 Jan 2025 by Antonio Pequeño IV · Forbes

Topline

The Securities and Exchange Commission sued tech billionaire Elon Musk on Tuesday, accusing him of securities fraud linked to his $44 billion takeover of Twitter, now known as X.

Key Facts

The SEC specifically accused Musk of failing to disclose his ownership stake of Twitter in a timely manner before purchasing the social media platform outright in 2022.

Regulators also said Musk’s alleged non-compliance with disclosure rules allowed him to “underpay by at least $150 million for shares he purchased after his financial beneficial ownership report was due.”

Musk owned a more than 5% stake in Twitter when he missed a March 24, 2022 deadline to publicly disclose it, the lawsuit alleged—he reached a deal the next month to buy 100% of the company.

Musk filed his ownership report after the deadline, according to the lawsuit, which said Musk’s eventual filing of the report boosted Twitter’s stock price by 27% (Twitter was a publicly traded company before Musk’s takeover).

Musk’s lawyer, Alex Spiro, said Musk “has done nothing wrong” and characterized the lawsuit as a “sham.”

The SEC is seeking a jury trial and a court order forcing Musk to pay a civil penalty and return his profits from the stock purchases at the heart of the lawsuit.

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Crucial Quote

“As the SEC retreats and leaves office - the SEC’s multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tak complaint against Mr. Musk under Section 13(d) for an alleged administrative failure to file a single form—an offense that, even if proven, carries a nominal penalty,” Spiro told Forbes.

Forbes Valuation

We estimate Musk’s net worth at $417 billion, making him the wealthiest person in the world.

Key Background

The SEC has investigated Musk for years following his blockbuster purchase of Twitter. Regulators sued the tech billionaire in 2023 for refusing to testify about the acquisition, saying he “abruptly notified the SEC staff that he would not appear” two days before a scheduled testimony and cited “spurious objections.” Musk later agreed to testify in the investigation but did not show up for his testimony last September in Los Angeles, provoking the SEC to seek sanctions against him. The SEC said Musk’s excuse, a scheduling conflict with a SpaceX rocket launch, was indicative of “gamesmanship.”