With Elon Musk’s move to dismiss the lawsuit this is the first time we’ve seen his take. This lawsuit was initiated by the U.S. Securities and Exchange Commission (SEC) regarding his purchase of Twitter stock. The regulatory body alleges that Musk violated U.S. securities laws by failing to disclose his stock holdings in a timely manner, which led to accusations of wrongful financial advantage.
The SEC alleges that Musk failed to disclose his 13.3% stake in Twitter by the SEC’s deadline of March 14, 2022. He withheld this critical information outright until April 4, 2022. That’s 21 days after he passed the 5% threshold, which triggered a requirement for him to disclose it right away. This delay allegedly allowed Musk to buy his shares at significantly lower prices. And by doing so, he saved taxpayers an estimated $150 million.
Musk’s legal team described the lawsuit as “a waste of this Court’s time and taxpayer resources.” They paint the SEC’s vendetta against Musk as a series of illegal attempts to choke off his free speech – which they call a “relentless pursuit.” This sentiment highlights the ongoing scrutiny Musk has faced from the SEC over the past seven years, including a previous investigation related to a tweet about Tesla’s ownership that ultimately cleared him of wrongdoing.
Musk’s lawyers claim in their filing that the SEC’s enforcement actions against him have been excessive. In doing so, they alluded to the SEC’s prayer for overtly punitive monetary relief. They say it’s more than 1,500 times bigger than the average penalties assessed on other innocent people facing similar claims.
“The Commission’s selective enforcement against Mr. Musk – seeking monetary relief more than 1,500 times larger than the relief imposed on similarly situated individuals in similar cases – reveals an agency targeting an individual for his protected criticism of government overreach.” – Musk’s lawyers
Musk did eventually buy Twitter outright, and renamed it X, ultimately ensuring his total domination over the platform. The SEC further argues that Musk’s late disclosure (over three years) allowed him to cash in on the price bumps from purchasing shares at massively discounted prices.
Musk filed his official answer to the lawsuit on Thursday. This represents an important advance in what will likely be a protracted legal war. This case has a long way to go, but will undoubtedly be closely watched. These are burning questions, writ large, for regulatory practice in the tech and finance sectors, as well as what it means for Musk himself.