The US SEC sued Elon Musk for late disclosure of Twitter shares
By Jonathan Stempel
(Reuters) – Elon Musk was sued by the U.S. Securities and Exchange Commission on Tuesday, accusing him of amassing a large stake in social media company Twitter, which he later bought while the world’s richest man waited long enough to go public in 2022.
In a complaint filed in federal court in Washington, D.C., the SEC said Musk violated federal securities laws by waiting 11 days too long to disclose his initial purchase of 5% of Twitter’s common stock.
SEC rules require investors to disclose when they pass the 5% ownership threshold within 10 calendar days, or March 24, 2022, in Musk’s case.
At the expense of unsuspecting investors, the SEC said Musk instead bought more than $500 million worth of Twitter shares at an artificially low price, eventually holding a 9.2% stake on April 4, 2022.
Twitter’s stock price rose more than 27 percent following that disclosure, the SEC said.
Tuesday’s lawsuit seeks to compel Mook to pay civil penalties and disgorge ill-gotten gains.
Musk eventually bought Twitter in October 2022 for $44 billion and renamed it X.
In an email, Musk’s lawyer, Alex Spiro, called the SEC’s lawsuit the culmination of a “multi-year campaign of harassment” by the regulator against his client.
“Today’s action is an admission by the SEC that they cannot bring a valid case,” he said. “Mr. Mook has done nothing wrong and everyone will see this sham for what it is.”
Spiro added that the charges only deal with the alleged administrative failure of failing to file a form — an offense punishable by nominal fines even if proven.
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Musk, an adviser to US President-elect Donald Trump, is worth $417 billion, according to Forbes magazine, through businesses such as electric car maker Tesla and rocket company SpaceX.
He is worth twice as much as Amazon.com founder Jeff Bezos, the world’s second-richest person at $232 billion, according to Forbes.
The SEC sued Musk six days before Trump’s Jan. 20 inauguration.
SEC Chairman Gary Gensler will step down later that day, and Paul Atkins, who Trump has nominated to replace him, is expected to review many of Gensler’s rules and enforcement actions.
Musk was sued by former Twitter shareholders in Manhattan federal court over the late disclosure.
If that’s the case, Musk says it’s almost impossible to believe he wanted to defraud other shareholders, and “all indications” are that his delay was a mistake.
