US SEC sues Elon Musk over alleged violations in Twitter acquisition

The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, Tesla Inc. founder, over alleged violations in Twitter acquisition.

Musk purchased Twitter (now X) in October 2022 for $44 billion.

In a lawsuit filed at a federal court in Washington DC, the SEC said Musk failed to disclose his ownership of more than 5 percent of Twitter’s shares on time.

The securities agency said the delay allegedly allowed the billionaire to purchase the company’s stock at “artificially low prices”.

According to the suit, Musk was obligated to disclose his increasing stake in the social media platform by March 24, 2022, but he delayed disclosing his 9.2 percent ownership until April 4 of the same year — after he bought more shares in the company.

The SEC argues that during this period, Musk’s failure to report his ownership allowed him to acquire over $500 million in shares at prices that did not reflect his influence over the company.

The suit added that when the Tesla founder eventually made his ownership public, Twitter’s stock surged by more than 27 percent, leading the SEC to allege that Musk underpaid by more than $150 million due to his disclosure delay.

“Had Musk and his wealth manager disclosed his ownership as required, the stock price would likely have increased significantly,” the suit alleged.

The SEC seeks civil penalties and demands that Musk disgorge any profits gained from the delay.

The agency argues that Musk’s actions misled investors and violated the principle of transparency, which is central to securities laws.

In response, Musk dismissed the lawsuit on X, calling the organisation “totally broken”.

He also accused the SEC of ignoring serious crimes and paying attention to trivial issues.

“They spend their time on s— like this when there are so many actual crimes that go unpunished,” he wrote.

Musk’s legal battles with the SEC are not new.

In 2018, the agency accused him of misleading individuals investing in Tesla, his electric vehicle company; and in 2023, it sought a court order to compel Musk to testify as part of its investigation into his acquisition of X.

The latest lawsuit comes just days before Gary Gensler, SEC chair, is set to step down on January 20, coinciding with the inauguration of President-elect Donald Trump.