SEC Sues Elon Musk for Securities Fraud Over Twitter Deal

Highlights:

• The United States SEC has sued Elon Musk, citing security law violations over his Twitter acquisition deal.
• According to the legal document, the businessman failed to report beneficial ownership report to the SEC.
• Elon Musk’s actions caused considerable economic harm to Twitter investors.

The world’s richest businessman, Elon Musk, was recently served a new lawsuit by the United States Securities and Exchange Commission. The filing documents presented in a Washington, DC, federal court alleged that the businessman was involved in securities fraud in part of the deals that saw him acquire X, previously known as Twitter.

JUST IN: 🇺🇸 SEC sues Elon Musk over alleged securities violations, days before Gary Gensler is set to resign.

— Watcher.Guru (@WatcherGuru) January 14, 2025

Lawsuit Details

The over ten-page court document was centered on Elon Musk’s failure to timely present a beneficial ownership report to the SEC when he acquired more than 5% shares from Twitter’s common stock. Per the SEC, the businessman started purchasing the stocks in early 2022, and by March 14, 2022, he had already bought more than 5% of the sellable entities.

By law, he was expected to file a beneficial ownership report with the SEC on or before March 24, 2022. For context, the timeline between exceeding the 5% shares and presenting the ownership report to the SEC must not exceed ten days as stipulated by the law. However, such never happened, as Elon Musk waited till April 4, 2022, eleven days after the deadline elapsed, to disclose his share ownership.

On the day he filed his beneficial ownership report with the SEC, Elon Musk revealed that he had already bought over 9% of Twitter’s outstanding common stock. Following his disclosure, Twitter’s stock price appreciated by over 27%, exceeding the previous day’s closing price.

Meanwhile, according to the regulatory watchdog, the businessman’s actions were in total defiance of the Federal security laws. It enabled him to purchase more shares at significantly discounted prices. The lawsuit mentioned that Elon Musk spent over $500 million during his shares purchasing window.

The lawsuit added:

“In total, Musk underpaid Twitter investors by more than $150 million for his purchases of Twitter common stock during this period. Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm.”

The SEC Demands Appropriate Penalties for Elon Musk

As usual, the SEC filing sought punishments for the businessman. Part of the regulatory body’s demands were financial penalties. According to the SEC, the court should order Elon Musk to forfeit profits from the discount after failing to present his beneficial ownership report to the SEC. In addition, the regulatory watchdog expects Elon Musk to pay civil penalties.

Aside from the financial punishments, another significant part of the SEC’s demand was a jury trial. Per the regulatory body, the trial will be crucial in determining if the world’s richest man actually violated the Securities stipulations. How events unfold remains to be seen. However, Donald Trump will assume office in a few days time. His office assumption will no doubt favor major crypto proponents, which includes Elon Musk.

Elon Musk Reacts to the SEC’s Lawsuit

As expected, the businessman has responded to the SEC’s allegations. He reacted to the lawsuit via a comment in an X post. At the time of writing, the businessman’s response had garnered considerable attention. It now has over 100K views, over 2k likes, several reposts, and bookmarks.

In his words, Elon Musk tagged the SEC as a “Totally Broken Organisation.” Still, in the same tweet, he mentioned that the regulatory agency prefers to spend its time and resources on irrelevant issues while allowing actual criminals to go unpunished.

Totally broken organization.

They spend their time on shit like this when there are so many actual crimes that go unpunished.

— Elon Musk (@elonmusk) January 15, 2025