SEC Sues Elon Musk Over Alleged Undisclosed X Share Purchases

The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, accusing him of not properly disclosing his ownership stake in X (formerly Twitter) as mandated by federal law. The SEC alleges that this oversight enabled Musk to acquire shares of the platform at “artificially low prices.”
According to the lawsuit, Elon Musk began purchasing a “significant number” of Twitter shares prior to finalizing his $44 billion acquisition of the company in October 2022. By mid-March 2022, he had accumulated over 5% of Twitter’s common stock, which triggered a legal obligation to inform the SEC within 10 calendar days. However, the suit claims that Musk did not disclose this information until April 4, 2022. The SEC argues that if Musk and his wealth manager had disclosed his ownership as required, the stock price would likely have seen a significant increase.
Musk’s lawyer, Alex Spiro, responded to the lawsuit, stating to CNN that “Musk has done nothing wrong” and that the lawsuit was “an admission by the SEC that they cannot bring an actual case.” He further described it as “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.”
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According to the complaint, Musk’s failure to disclose his ownership kept purchase prices low, and as a result he “underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period.” The lawsuit was filed in DC federal court. By the end of March 24, 2022, Musk’s stake in the company exceeded 7%, according to the lawsuit. The following day, he purchased almost 3.5 million shares. Over the subsequent days, he also expressed interest in acquiring Twitter to members of the company’s board of directors.
Musk joined Twitter’s board and formally disclosed his stake in the company in early April 2022. By that time, he owned more than 9% of the company, and according to the suit, “Twitter’s stock price increased more than 27%.” The SEC argues that “Musk paid significantly less for the shares of Twitter common stock he purchased between March 25, 2022 and April 1, 2022 than if he had timely disclosed,” and that he spent more than $500 million acquiring shares during this period. This lawsuit is among the final actions under SEC Chair Gary Gensler, who is stepping down this month following President-elect Donald Trump’s vow to fire him.
It remains unclear whether the incoming SEC head will pursue the lawsuit. Elon Musk, a vocal supporter of Trump, is taking a prominent role in the new administration as co-head of the Department of Government Efficiency. Musk has had a history of clashes with Gensler, even mocking him on X. The SEC has been investigating Musk over his acquisition of X. In December, Musk revealed that the agency demanded he pay an undisclosed fine to settle charges over his purchases of Twitter shares. Musk also faced trouble last year for failing to appear for testimony related to the investigation.
Source: cnn