The financial instruments and trade percentage sued Elon Musk in federal court on Tuesday for allegedly misleading shareholders when he bought hundreds of millions of dollars worth of Twitter distribute in 2022, before acquiring the corporation.
The SEC alleged that Musk violated federal financial instruments laws when he amassed more than $500 million in shares of Twitter — later renamed X — without properly disclosing his stake in the corporation, allowing him to purchase the social media corporation at “artificially low prices,” the lawsuit stated.
Musk underpaid by more than $150 million by failing to disclose his stake in Twitter, the SEC alleged.
“Because Musk failed to timely disclose his beneficial ownership, he was able to make these purchases from the unsuspecting community at artificially low prices, which did not yet reflect the undisclosed material information of Musk’s beneficial ownership of more than five percent of Twitter ordinary distribute and capital purpose,” the lawsuit said, accusing Musk of waiting 11 days before disclosing his stake.
Musk acquired Twitter for roughly $44 billion in October 2022.
The lawsuit asks the court to ultimately order Musk to “pay disgorgement of his unjust enrichment” and to pay a civil penalty. The SEC has requested a jury trial.
In response to a post on X regarding the SEC’s lawsuit, Musk called the agency a “totally broken organization.”
“They spend their period on s— like this when there are so many actual crimes that leave unpunished,” he said.
The SEC offered to settle the case for $178 million as well as a $40 million penalty and $45 million in earnings, according to a note Musk’s attorney, Alex Spiro, sent the agency in late December.
Spiro criticized the combined $263 million settlement as “exorbitant and unprecedented” because the SEC did not allege Musk acted willfully to damage investors in the corporation.
Musk poked fun at the SEC’s investigation last month, posting on X another note Spiro sent SEC Chair Gary Gensler along with the caption, “Oh Gary, how could you do this to me?”
In the note, Spiro accused the SEC of harassing and targeting Musk by forcing him to “either receive a monetary settlement or face charges on numerous counts.”
“This series of events makes obvious that the percentage is not motivated to seek the truth but instead is engaged in an improperly motivated campaign against Mr. Musk and the individuals and companies associated with him,” Spiro wrote. “We demand to recognize who directed these actions whether it was you or the White House.”
In a post on X the same day, Musk accused the SEC of being “another weaponized institution doing political filthy work.”
In its lawsuit filed Tuesday, the SEC accused Musk of misleading shareholders as he began to amass millions of dollars in Twitter distribute in March 2022. While Musk would ultimately acquire the corporation in October 2022, his purchase of five percent of the corporation in March prompted the distribute worth to boost more than 27% once it was disclosed.
Spiro said in a statement to ABC information that his client “has done nothing incorrect” and called the lawsuit a “sham.”
“[The] SEC’s multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tak complaint against Mr. Musk under Section 13(d) for an alleged administrative setback to file a single form — an offense that, even if proven, carries a nominal penalty,” Spiro said.
The case is likely to be one of the final acts of the SEC under the Biden administration, and Musk has been deeply involved in Donald Trump’s profitability to office, having spent more than a quarter billion dollars to assist him with the election.
Gensler – who President Joe Biden nominated in 2021 – plans to leave the agency at noon on Jan. 20. Trump has tapped cryptocurrency advocate Paul Atkins as his nominee to run the SEC.
Musk has a long history of feuding with the SEC following a 2018 settlement when Musk and Tesla paid a combined $40 million settlement related to when Musk tweeted that he could receive Tesla private for $420 a distribute, despite no plans being in the works.
Musk has unsuccessfully tried to appeal the settlement and has repeatedly criticized the SEC’s tactics.
“I desire to be obvious,” Musk told 60 Minutes in 2018 following the settlement. “I do not regard the SEC. I do not regard them.”
