Elon Musk Sued by U.S. SEC Over Delay in Disclosing Twitter Stock Purchases

Elon Musk, the world’s wealthiest individual, has been sued by the U.S. Securities and Exchange Commission (SEC), which accuses him of failing to properly disclose his acquisition of a significant stake in Twitter back in 2022. The SEC claims that Musk violated federal securities law by waiting beyond the deadline to report his purchase of 5% of the social media company, a purchase that ultimately led to him acquiring Twitter for $44 billion in October 2022.

The Lawsuit: What’s the Allegation?

The SEC's lawsuit, filed in a Washington D.C. federal court, accuses Musk of delaying his disclosure of buying Twitter shares until April 4, 2022—11 days after the legally required 10-day window for such a filing. The SEC states that Musk crossed the 5% ownership threshold in March 2022 and should have made his purchase public by March 24 of that year. By the time he did disclose his stake, it had grown to 9.2%.

The SEC argues that Musk’s delayed filing allowed him to purchase more than $500 million worth of Twitter shares at artificially low prices. Once his purchases were publicly disclosed, Twitter's stock price rose more than 27%, benefiting Musk at the expense of unsuspecting investors.

Musk’s Response: A “Harassment Campaign”

Musk’s lawyer, Alex Spiro, responded to the SEC’s lawsuit, labeling it as the culmination of what he described as a "multi-year campaign of harassment" against the billionaire. Spiro insisted that Musk had not done anything wrong, claiming that the delay was a minor administrative issue and that the penalty—if any—is “nominal.”

“Musk did nothing wrong, and this is simply an attempt to mischaracterize a minor administrative error,” Spiro said in an email statement.

A History of Conflict Between Musk and the SEC

This lawsuit is not Musk’s first confrontation with the SEC. The regulator previously sued Musk in 2018 over a tweet in which he claimed to have secured funding to take Tesla private. Musk eventually settled that case by paying a $20 million fine, stepping down as Tesla’s chairman, and agreeing to have his social media posts reviewed by company lawyers before being published.

The SEC’s current lawsuit comes just days before the inauguration of U.S. President-elect Donald Trump. It is expected that Trump’s nominee for SEC Chair, Paul Atkins, will review many of the policies and actions initiated under the current chair, Gary Gensler, who will step down.

Other Legal Challenges and Musk’s Financial Position

Musk is also facing legal challenges from former Twitter shareholders who have alleged that the delay in disclosing his stock purchases caused them financial harm. However, Musk has repeatedly insisted that the delay was not intentional and that there was no attempt to deceive shareholders.

Musk’s wealth, estimated at $417 billion by Forbes, comes from his major roles in Tesla, SpaceX, and other ventures. His wealth is nearly double that of Amazon founder Jeff Bezos, who ranks as the second-richest person in the world.

Potential Consequences of the Lawsuit

While the SEC is seeking a civil fine and demands that Musk return any profits derived from the late disclosure, it is unlikely that Musk will face criminal charges. However, the reputational damage could be significant, especially considering Musk's high-profile role in the tech industry.

The SEC’s lawsuit emphasizes the importance of transparency and timely disclosures in the financial markets, where delays in reporting ownership stakes can lead to market manipulation and disadvantage investors.

Conclusion: A Continuing Legal Battle

The SEC’s latest lawsuit against Elon Musk underscores his ongoing tensions with the regulatory body and highlights the complexities of corporate disclosure laws. While Musk has denied wrongdoing, the outcome of this case could influence future regulatory actions and the level of scrutiny faced by high-profile executives in the tech sector.