SEC files lawsuit against Elon Musk for deceiving investors by concealing information
The US Securities and Exchange Commission has filed a lawsuit against Elon Musk, accusing him of defrauding shareholders of $150 million by concealing his undisclosed purchase of 10% of Twitter shares in 2022. The news of Musk’s acquisition of nearly 10% of Twitter shares came to light in spring 2022 when regulatory filings revealed the information. However, Musk had been secretly accumulating these shares for weeks without disclosure, in an attempt to prevent the share price from rising and making the remaining shares more expensive. The SEC claims that this hidden purchase led to the people who sold their shares to Musk receiving lower prices, causing them financial harm. The SEC is seeking a $200 million settlement from Musk, a significant increase from his 2018 case, where he and Tesla were fined $20 million each for a misleading tweet about taking Tesla private.
In response to the SEC’s lawsuit, Musk’s attorney, Alex Spiro, claims that the SEC is unfairly targeting his high-profile client. Spiro argues that the complaint against Musk is an administrative failure to file a single form, which, even if proven, carries a nominal penalty. Despite the SEC’s accusations, Musk paid a considerably high price for the Twitter shares at $54.20 each, a price he was compelled to pay by the courts. However, disgruntled shareholders who sold their shares at lower rates are pursuing a separate class-action lawsuit against Musk.
As the Biden administration comes to a close, and with Musk rumored to assume a prominent role in the Trump administration, the fate of this lawsuit remains uncertain. Trump has appointed Paul Atkins, a supporter of cryptocurrencies and someone who has opposed penalties on corporations and their owners, as the potential SEC chair. This aligns with Musk’s interests, as he is also known for his involvement in the crypto world. The possibility of the lawsuit being dismissed under a Trump administration, given Musk’s affiliation with the former president, cannot be ruled out.
While Musk’s initial purchase of Twitter shares may seem beneficial to shareholders, those who sold their shares at lower prices to Musk perceive it as disadvantageous. Their dissatisfaction has led to a legal battle against Musk, emphasizing the complexity and controversies surrounding corporate dealings and legal obligations. The outcome of the SEC’s lawsuit against Musk will be closely monitored, as it delves into the intricacies of securities regulations and corporate accountability.
