Elon Musk, the billionaire entrepreneur and CEO of Tesla, has recently come under fire from the US Securities and Exchange Commission (SEC) for allegedly failing to disclose his acquisition of a significant stake in Twitter, now known as X. This lawsuit represents the culmination of the SEC’s investigation into Musk’s investment activities with the social media platform in 2022.
According to the SEC, Musk failed to meet the legal requirement to disclose his ownership of more than 5% of Twitter’s shares within the mandated 10-day period. The regulatory body highlighted that Musk surpassed the 5% threshold on March 14, 2022, but did not file his disclosure until April 4—11 days past the deadline. The SEC claims that this delay allowed Musk to purchase shares at artificially low prices, saving him over $150 million and causing harm to other investors who sold their shares during that time frame.
The Commission argues that Musk’s actions violated the Securities Exchange Act of 1934, which aims to ensure fair and transparent markets by requiring timely disclosures of significant ownership stakes. As a result, the SEC has requested the court to impose a civil penalty on Musk and compel him to return any profits allegedly gained through the delayed disclosure.
In response to the lawsuit, Musk took to X to criticize the SEC, labeling the organization as “totally broken” and accusing it of focusing on trivial matters instead of addressing more serious financial crimes. Musk’s public dismissal of the lawsuit has sparked further debate among industry experts, with some questioning the SEC’s priorities in this case.
John Reed Stark, a former official in the SEC’s Internet Enforcement division, suggested that Musk’s lawyers could argue that his initial intentions were to secure a board seat rather than pursue a complete acquisition of Twitter. Stark also criticized the investigation as potentially wasteful and questioned the timing of the lawsuit, speculating that it may be a ploy by SEC Chair Gary Gensler to garner attention before his exit from the organization.
Overall, the legal battle between Elon Musk and the SEC highlights the complexities of regulatory compliance in the financial markets and raises questions about the enforcement priorities of the Commission. As this case unfolds, it will be interesting to see how the court rules on the allegations against Musk and what implications it may have for future disclosures by high-profile investors.