SEC Sues Musk for Delayed Disclosure of Twitter Stock Purchases

TLDR

• SEC filed a lawsuit against Elon Musk for allegedly failing to disclose his Twitter stock purchases in time, potentially saving him $150 million
• Musk’s legal team calls the SEC complaint a “sham” and claims it stems from bureaucratic matters
• The SEC is seeking financial penalties and wants Musk to forfeit profits, demanding a jury trial
• The acquisition timeline includes Musk buying over 5% of Twitter stock in March 2022, waiting 11 days to disclose, then revealing a 9% stake in April
• This adds to ongoing legal battles, including a separate lawsuit by Oklahoma Firefighters Pension System over the Twitter acquisition

The U.S. Securities and Exchange Commission has filed a lawsuit against Elon Musk, claiming he broke securities laws during his acquisition of Twitter, now known as X. The case centers on Musk’s purchase of Twitter stock in March 2022 and his alleged delay in reporting these purchases to regulators.

Federal regulations require investors to notify the SEC within ten days of acquiring more than 5% of a company’s shares. The SEC claims Musk missed this deadline, continuing to buy shares for 11 days without proper disclosure.

According to the lawsuit filed in federal court in Washington, D.C., this delay allowed Musk to purchase additional shares at lower prices. The SEC estimates this timing saved him approximately $150 million, as the stock price would likely have increased with public knowledge of his growing stake in the company.

The SEC sued Elon Musk in federal court over an alleged securities violation, according to a court docket https://t.co/5flQePAxcG

— Bloomberg (@business) January 14, 2025

When Musk finally revealed his investment on April 4, 2022, he owned more than 9% of Twitter’s stock. The news caused Twitter’s share price to jump by 27% that week, highlighting the market impact of his disclosure.

Alex Spiro, Musk’s attorney, has dismissed the SEC’s complaint as baseless. He describes it as a “sham” stemming from bureaucratic matters, arguing that even if proven, the alleged failure to submit proper documentation would have limited consequences.

The legal battle adds another chapter to the tense relationship between Musk and the SEC. Last month, Musk told users on X that the SEC had attempted to settle the case with a fine, but he declined, leading the agency to pursue charges.

The SEC’s lawsuit seeks several remedies. The agency wants Musk to return any profits made from the alleged non-disclosure and pay additional civil penalties. They have also requested a jury trial to determine whether Musk violated securities laws.

This case follows Musk’s eventual $44 billion acquisition of Twitter in October 2022. That deal itself faced complications, including Musk’s attempts to withdraw due to concerns about the number of automated accounts on the platform.

The current SEC action runs parallel to another lawsuit filed by the Oklahoma Firefighters Pension and Retirement System in 2022. That case, known as Rasella v. Musk, claims Musk defrauded investors through his delayed disclosure of plans to acquire Twitter. The pension fund argues these delays affected other shareholders’ investment decisions and caused financial harm.

The timing of the SEC’s lawsuit coincides with leadership changes at the agency. Current SEC Chair Gary Gensler will end his term on January 20, following President-elect Donald Trump’s inauguration. Trump has indicated plans to reduce regulatory oversight.

The case details show Musk continued buying Twitter shares between March 24 and April 1, 2022, after crossing the 5% threshold that triggers disclosure requirements. By the time he filed the required paperwork on April 4, his stake had grown to 9.2%.

Court documents reveal the SEC’s investigation found that other investors sold their Twitter shares during this period at prices lower than they might have received had Musk’s interest in the company been public knowledge.

The lawsuit represents the latest development in Musk’s ongoing interactions with federal regulators. Previous disputes have involved his tweets about Tesla’s stock price and funding plans, leading to earlier settlements and oversight requirements.

Records show Musk’s Twitter share purchases totaled approximately $2.6 billion before he announced his stake in the company. The SEC alleges that by delaying his disclosure, he avoided drawing attention to his growing ownership position.

The case filing indicates the SEC gathered evidence from trading records, communication logs, and public statements to build their argument about the timing and nature of Musk’s stock purchases.