SEC sues Musk, claims Twitter improperly disclosed ownership

Filed a lawsuit against the SEC Elon Musk on Tuesday, alleging securities fraud by not disclosing that the billionaire had acquired an active stake in Twitter in 2022, a secret that allowed him to buy shares at “artificially low prices.”

Musk is also the CEO of Tesla and SpaceX. Twitter bought it 44 billion dollars at the end of 2022 and changed its name to X the following year. Prior to the acquisition, he had built up a position in the company of more than 5%, which required him to go public within 10 calendar days of reaching that threshold.

According to the SEC’s civil complaint filed in U.S. District Court in Washington, Musk was more than 10 days late in reporting that material information, “allowing him to underpay at least $150 million for the shares he bought after the financial beneficial ownership report.” it was time.”

It was the SEC investigates Musk or anyone working with him committed securities fraud in 2022. Tesla The CEO sold shares in the car company and increased his stake in Twitter before the leveraged buyout. Musk he said in an article last month X said the SEC had issued a “settlement demand,” pressuring him to agree to a deal that included a fine within 48 hours or “face multiple charges” related to the stock purchase.

Musk’s attorney, Alex Spiro, said in an emailed statement Tuesday that the SEC’s action “could not produce an actual case.” He added that Musk had “done nothing wrong” and called the lawsuit a “fraud” and the result of a “year-long campaign of harassment” that resulted in a “single-count complaint.”

Musk is just one week away from having a potentially influential role in government as president-elect Donald Trump The second term begins on January 20. Musk, a key financial backer of Trump in the latter stages of the campaign, is set to lead an advisory group that will focus in part on reducing regulations, including those affecting Musk’s various companies.

In July, Trump promised to fire the SEC chairman Gary Gensler. After Trump’s victory in the elections, Gensler announced that he would resign in his place.

In a separate civil suit related to the Twitter deal, the Oklahoma Firefighters Retirement and Retirement System is suing Musk, accusing him of intentionally concealing his progressive investments in the social network and his intent to buy the company. Lawyers for the pension fund argued that Musk had influenced the decisions of other shareholders and placed them at a disadvantage by not publicly disclosing his investments.

The SEC said Musk crossed the 5% ownership threshold in March 2022 and was required to disclose his holdings by March 24.

“On April 4, 2022, eleven days after the report was filed, Musk finally disclosed his beneficial ownership in a filing with the SEC, disclosing that he acquired more than nine percent of Twitter’s outstanding shares,” the complaint states. “Twitter’s stock price that day rose more than 27% from the previous day’s closing price.”

The SEC alleges that Musk spent more than $500 million to buy more Twitter stock between the requested disclosure and the day he actually filed. This allowed him to buy stock “at artificially low prices from the unsuspecting public,” the complaint says. According to the SEC, it “underpaid” Twitter shareholders by more than $150 million during that period.

In the complaint, the SEC is seeking a jury trial and ordering Musk to “pay for the liquidation of his unjust enrichment,” as well as civil penalties.

Shortly after April 2022, after its ownership was disclosed and it became known that he was the largest shareholder, Musk was ready to join Twitter’s board. However, he quickly abandoned this plan. he says to the board would not sit.

What followed was a six-month drama that began with Musk’s board protesting an unsolicited offer in mid-April. Twitter’s board finally accepted Musk’s offer later that month. Soon after, Musk tried to backtrack, claiming that Twitter had misrepresented the number of “bots” on its service.

Musk sealed the deal in October 2022, famously walking into the company’s San Francisco office with a sink in hand.

“Enter Twitter HQ – let it sink in!” Musk he wroteadds his introduction video.

This story is evolving.