The Securities and Exchange Commission (SEC) has taken legal action against Elon Musk, filing a lawsuit on Tuesday that accuses the billionaire entrepreneur of securities fraud. The SEC claims Musk acquired shares of Twitter at "artificially low prices" by not disclosing his ownership stake, which allegedly breached securities laws. This lawsuit follows an investigation initiated in 2022 into whether Musk had engaged in securities fraud.
The allegations point to Musk's acquisition of a significant ownership stake in Twitter, exceeding 5%, which legally required public disclosure. Musk reportedly sold shares in Tesla to support his investment in Twitter, ahead of a $44 billion leveraged buyout. Upon acquiring Twitter, Musk rebranded the platform as X.
"allowing him to underpay by at least $150 million for shares he purchased after his financial beneficial ownership report was due." – SEC complaint
Musk's roles as CEO of Tesla and SpaceX add another layer of complexity to the case. The SEC has issued a settlement demand to Musk, which includes a fine and requires him to agree within 48 hours. Musk communicated via a post on X that he felt pressured to agree to the settlement or face charges on multiple counts.
The lawsuit alleges that Musk's failure to disclose his ownership allowed him to purchase shares at significantly lower prices, benefiting financially while potentially harming other investors. The SEC's complaint underscores the financial advantage gained by Musk due to the non-disclosure of his beneficial ownership.
In addition to his involvement with Twitter, Musk stands as a significant financial supporter of President-elect Donald Trump's campaign. As Trump prepares to begin his second term on January 20, Musk is also expected to lead an advisory group focused on reducing regulations impacting his companies.
The SEC's investigation indicates that Musk's actions may have misled the market and investors by not adhering to mandatory disclosure requirements. This legal battle highlights the ongoing scrutiny faced by high-profile executives and the importance of transparency in financial transactions.