Elon Musk is being sued by the U.S. Securities and Exchange Commission over his alleged failure to provide financial statements about his stock ownership before purchasing the social media company (then-named) Twitter.
The events in question stem from his 2022 purchase. The Tesla and SpaceX CEO is accused of failing to disclose ownership of a significant amount of stock in Twitter before he bought the company. Musk’s inability to promptly provide this information was allegedly a rule violation.
By failing to disclose the amount of Twitter stock he owned before buying the social media corporation. This failure to do so allegedly allowed Musk to purchase company shares at “artificially low prices.” The SEC claimed that Musk underpaid by approximately $150 million for stock shares he bought “after he should have disclosed his ownership of more than 5% of Twitter’s shares,” the Associated Press reported.
“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,” the suit claimed.
“Had Musk and his wealth manager disclosed his ownership as required, the stock price would likely have increased significantly,” the SEC’s lawsuit alleged.
Musk bought Twitter in October 2022 to promote free speech and eliminate censorship on the social media platform after accusations that the previous owner restricted the number of people who could view certain political posts on the platform, most notably those with conservative and Republican viewpoints.
The move was criticized and condemned by many left-wing politicians, pundits, and commentators. After several months of owning the company, Musk changed its name to X. Musk released the “Twitter Files” in December 2022, which revealed that the previous regime suppressed specific news stories, particularly posts about the infamous “Hunter Biden laptop” story. The report invariably revealed that before Musk bought Twitter, the site’s administrators “took extraordinary steps to suppress the story, removing links and posting warnings that it may be ‘unsafe.’”
Musk’s attorney, Alex Spiro, claimed the X CEO did “nothing wrong” and the lawsuit “was a sham,” according to the Associated Press.
“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 said.
The lawsuit, however, might be short-lived.
The SEC’s current commissioner, Gary Gensler, is expected to resign on January 20, according to a press release.
“The Securities and Exchange Commission is a remarkable agency,” Gensler said. “The staff and the Commission are deeply mission-driven, focused on protecting investors, facilitating capital formation, and ensuring that the markets work for investors and issuers alike. The staff comprises true public servants. It has been an honor of a lifetime to serve with them on behalf of everyday Americans and ensure that our capital markets remain the best in the world.”
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“I thank President Biden for entrusting me with this incredible responsibility,” he added. “The SEC has met our mission and enforced the law without fear or favor. I’ve greatly enjoyed working with my fellow Commissioners, Allison Herren Lee, Elad Roisman, Hester Peirce, Caroline Crenshaw, Mark Uyeda, and Jaime Lizárraga. I also thank Congress, my colleagues across the U.S. government, and fellow regulators around the world.”
It is unclear if Gensler’s replacement will continue with the lawsuit against Musk.
