Elon Musk was sued Tuesday by the U.S. Securities and Exchange Commission (SEC). The latter accused the world’s richest person of waiting too long to disclose that he acquired a large stake in Twitter in 2022.
This reports Reuters. In a complaint filed in federal court in Washington D.C., the SEC alleged that Musk violated federal securities laws. Musk waited 11 days too long to report his initial purchase of 5% of Twitter common stock.
An SEC rule requires investors to report within 10 calendar days if they exceed a 5% ownership threshold. The SEC stated that Musk bought more than $500 million of Twitter shares at artificially low prices. Only well after that did he make his purchases public. By then, he owned 9.2% of the shares. Twitter’s share price rose more than 27% after that disclosure.
Tuesday’s lawsuit seeks to force Musk to pay a civil penalty and return the profits he wrongfully gained. Musk eventually bought Twitter for $44 billion in October 2022 and changed the platform’s name to X.
Campaign of harassment
In an e-mail, Alex Spiro, Musk’s lawyer, called the SEC lawsuit the culmination of the regulator’s years-long campaign of harassment against his client. According to him, Musk did nothing wrong, and the lawsuit would be a sham.
Spiro added that the lawsuit relates only to an alleged clerical error: failing to file one form. This violation would result in a nominal fine.
SEC chairman resigns
The SEC sued Musk six days before Trump’s inauguration on Jan. 20. SEC Chairman Gary Gensler is stepping down that day. Paul Atkins, nominated by Trump as his successor, is expected to review many of Gensler’s rules and enforcement actions.
Musk has also been sued in federal court in Manhattan by former Twitter shareholders over the late announcement. In that case, Musk argued that it is implausible to think he intended to mislead other shareholders. And it is clear that his delay was a mistake.
Also read: American watchdog suing Elon Musk for tweet