The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against billionaire Elon Musk, alleging that he failed to disclose his ownership of more than 5% of Twitter’s stock in a timely manner in early 2022, a violation of securities law. The delay, the SEC claims, allowed Musk to save at least $150 million on subsequent share purchases.
The SEC’s lawsuit revolves around Musk’s failure to disclose his ownership of over 5% of Twitter shares within the required timeframe. According to the complaint, Musk had surpassed the 5% ownership threshold by March 2022 but delayed filing the necessary disclosure until April 4, 11 days after the legal deadline.
By withholding this information, the SEC alleges, Musk was able to continue purchasing shares at a lower price, ultimately securing a financial advantage at the expense of other investors. This period of nondisclosure was critical as it kept the market unaware of Musk's growing stake in the company, potentially affecting stock prices.
Musk’s attorney, Alex Spiro, dismissed the lawsuit as a trivial matter, accusing the SEC of engaging in a “multi-year campaign of harassment” against the billionaire. Spiro characterized the complaint as an inconsequential administrative issue under Section 13(d) of the Securities Exchange Act, which mandates timely reporting of significant stock acquisitions.
“This is an admission by the SEC that they cannot bring an actual case,” Spiro stated, calling the allegations a “sham” that carries only a nominal penalty, even if proven.
Musk eventually acquired Twitter in October 2022 for $44 billion and later rebranded the platform as X. However, his path to ownership was contentious. After signing a deal to purchase Twitter in April 2022, Musk attempted to back out, leading Twitter to sue him to enforce the agreement.
The SEC had already launched an investigation in April 2022 into potential securities law violations related to Musk’s Twitter stock purchases and public statements. Recently, the SEC sought to compel Musk to testify regarding these transactions, intensifying the legal battle.
With SEC Chair Gary Gensler set to step down on January 20, 2025, it remains unclear whether the new administration will pursue the lawsuit. Critics argue that this legal action may signal the end of Gensler’s tenure, leaving the case’s continuation uncertain.
This lawsuit adds to Musk’s ongoing legal challenges, including other high-profile disputes involving Tesla and his compensation package. As the legal proceedings unfold, the case could have broader implications for securities law enforcement and the responsibilities of major shareholders in disclosing their stakes.
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