The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, accusing the billionaire of failing to disclose his substantial stake in Twitter, now known as X.
This delay allegedly caused Twitter investors to lose at least $150 million. According to the SEC's filing, Musk's failure to report his stock purchase within the legally required 10-day period allowed him to buy additional shares at lower prices before the news became public, leading to what the SEC calls "artificially low prices."
SEC: Musk's Delayed Twitter Disclosure Caused Financial Harm to Investors
Musk, who had acquired over 5% of Twitter's stock in March 2022, violated federal securities laws by waiting 21 days instead of the required 10 days to disclose his purchase to the SEC.
This delayed disclosure reportedly allowed Musk to continue purchasing shares for a significantly lower price than the stock was worth once his involvement became known.
After Musk revealed his stake, Twitter's stock price surged by 27%, indicating the impact of the delayed disclosure on the stock's value, ARS Technica said.
The SEC claims that investors who sold their shares during this period suffered significant financial harm.
By acquiring Twitter stock without promptly disclosing his ownership, Musk was able to purchase shares at a significantly lower price than their market value once the information became public.
Musk continued to buy Twitter shares, spending more than $500 million during the time he was required to make his purchase public. The lawsuit argues that this series of actions resulted in unfair financial benefits for Musk, while other investors were disadvantaged.
Musk Calls SEC Lawsuit a "Sham," Accuses Agency of Political Targeting
According to Unilad, Musk's legal team has pushed back against the lawsuit, calling the claims a "sham" and accusing the SEC of targeting Musk for political reasons.
His lawyer, Adam Spiro, suggested that the lawsuit was a result of a broader campaign of harassment by the SEC, led by its outgoing chairman, Gary Gensler.
Musk himself has criticized the SEC for focusing on him while allowing other issues to go unaddressed, labeling the regulatory body as "totally broken."
In the wake of the SEC lawsuit, Musk has also faced criticism for his handling of Twitter and his public statements regarding the platform.
Despite the legal challenges, Musk's wealth and influence remain significant, with Forbes estimating his net worth to be over $400 billion.
The lawsuit comes during a time of political change in Washington, as President-elect Donald Trump is set to take office. Musk has been named to lead the newly established Department of Government Efficiency, which could influence how future regulatory matters are handled.
While the case against Musk has yet to be resolved, the SEC is seeking both a civil penalty and the return of any unjust profits Musk made through his delayed disclosure. The outcome of this lawsuit could set a precedent for how similar cases are handled in the future.
