While President-elect Donald Trump’s inauguration is just around the corner, the US Securities and Exchange Commission (SEC) has filed a fresh lawsuit against billionaire and vocal Trump supporter Elon Musk. This lawsuit alleges that Musk committed securities fraud in 2022. Specifically, the US SEC claims that Elon Musk misled Twitter (now X) investors by failing to disclose his growing stake in the company on time as he prepared for the takeover. The development was reported by Bloomberg.
The US Securities and Exchange Commission has filed this lawsuit in the US District Court in Washington, D.C. According to the SEC’s new lawsuit, this could be a case of defrauding the company’s stakeholders of $150 million. Notably, Elon Musk initiated the acquisition of Twitter on April 14, 2022, and the billionaire completed the deal for $44 billion on October 28, 2022. He did this with the aim of transforming Twitter (now X) into an everything app.
But now, the SEC alleges the X owner misled shareholders during the acquisition process, as he did not disclose his Twitter stock purchases to them. According to the SEC filing, Musk had already started buying shares of Twitter before the acquisition in early 2022. The filing suggests that Musk had acquired more than 5% of the company’s outstanding stock by mid-March 2022.
For these purchases, Musk was required to inform or disclose them to the SEC within 10 days as per US federal securities laws. However, he allegedly failed to report it on time. In fact, this allowed him to purchase shares of Twitter at relatively low prices before his $44 billion takeover.
As a result, Musk is accused of underpaying other investors by at least $150 million for shares they bought during the same period. However, The SEC argues that if investors had known about Musk’s increasing interest (in terms of shares) in Twitter, they might have raised the company’s stock price by buying more shares.
“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 stock. That day, Twitter’s stock price increased more than 27% over its previous day’s closing price,” the agency said in its complaint.
Interestingly, this lawsuit comes a month after Elon Musk called the SEC a “totally broken organisation” in his X post. In December, Musk also claimed that the SEC had pressured him to agree to a deal, including a fine. At that time, the billionaire informed that the SEC had given him 48 hours to agree on a settlement demand or face multiple charges.
