SEC sues Elon Musk for allegedly failing to disclose Twitter acquisition on time

The Securities and Exchange Commission on Tuesday filed a lawsuit against Elon Musk alleging a securities violation related to his acquisition of Twitter, now called X.

According to a complaint filed in federal court in Washington, DC, the SEC claims Musk failed to timely disclose his 5% ownership stake in Twitter, in violation of federal securities laws. The SEC alleged that Musk waited to disclose the acquisition to build a large position in Twitter at a discount price.

The case comes in Gary Gensler’s last week as SEC chairman, before he steps down on January 20. Gensler and Musk have clashed several times over the past four years, including last month Musk scoffed at a settlement offer from the SEC office at X. However, Musk may face a friendlier SEC commissioner just weeks after Trump’s nominee takes office.

The SEC complaint states that Musk disclosed his acquisition on Twitter 11 days late. After buying more than 5% of Twitter — which Musk allegedly did on March 24, 2022 — he had to file a beneficial ownership report with the SEC. He filed the report on April 4, 2022, according to the SEC complaint.

During this delayed disclosure period, Musk allegedly increased his position in Twitter from a 5% stake to a 9% stake. On the day Musk disclosed his acquisition to the SEC, Twitter’s stock price rose 27% from the previous day’s closing price. The SEC claims it allowed Musk to pay more than $150 million for his stake in Twitter.

In its complaint, the SEC proposed Musk must return ill-gotten gains and pay additional civil penalties. Ultimately, a federal court will decide whether the SEC’s complaint has merit and whether Musk should be fined.

Musk’s lawyer, Alex Spiro, called the complaint an “admission” that the SEC could not bring a “real case.” Bloomberg tuesday

“With the SEC backing down and leaving office, the SEC’s multi-year harassment campaign against Mr. Musk culminated in the filing of a single-count Tiki Tuck complaint against Mr. Musk,” Spiro told Bloomberg.

In a December post on X, Musk shared a letter from Spiro A similar note, referring to “Years of Harassment” from the SEC. The letter rejected a settlement offer from the SEC surrounding the case.

To fill Gensler’s role, President-elect Donald Trump Nominated by Paul Atkinswho served as SEC commissioner during the Bush administration and is expected to be friendly to Trump’s allies. These days, Musk is as close to Trump as anyone, and X’s owner could face a different regulatory regime in just a few weeks.