US securities regulators sued Elon Musk in federal court in Washington on Tuesday in an enforcement action stemming from the $44 billion purchase of Twitter, now called X.
The lawsuit against Mr. Musk, who has become a close adviser to President-elect Donald J. Trump, it is likely to be one of the SEC’s most contentious final acts under Gary Gensler, its outgoing chairman.
The SEC claims that by buying Twitter in 2022, Mr. Musk violated securities laws by amassing a large equity position in the social media company without filing proper notice. The complaint said he waited 11 days before filing the required disclosure with the Securities and Exchange Commission
The regulatory filings are required so that investors in the market can monitor the movements of large investors and potential takeover bids.
Because Mr. By not disclosing his position, Musk was able to continue buying Twitter stock at an artificially low price, the SEC said in its lawsuit. The move “allowed him to pay at least $150 million less” for the additional shares before he belatedly disclosed his stake, the suit continued.
In recent weeks, Mr. Musk had taunted the SEC in posts on X about the possibility of a lawsuit. In December, he shared a letter his attorney, Alex Spiro, had sent to the agency rejecting a settlement offer in the case.
On Tuesday, Mr. Spyros denounced the latest deposition of the Capital Market Commission.
“Today’s action is an admission by the Capital Market Commission that it cannot bring a real case, because Mr. Musk has done nothing wrong and everyone sees this scam for what it is,” said Mr. Spiros in a statement. The agency had conducted a “multi-year campaign of harassment” against Mr. Musk, but filed “a sting complaint,” added Mr. Spiro.
This is the third time the SEC has gone to court with Mr. Mask The first lawsuit, during the first term of Mr. Trump, stemmed from inappropriate market-moving social media posts in which Mr. Musk has considered taking his electric car company, Tesla, private.
Before filing the suit on Tuesday, the SEC had also tried to force Mr. Musk to comply with a subpoena seeking his testimony.
With Mr. Gensler to leave with the swearing in of Mr. Trump on Monday, it is unclear whether the incoming regulators will continue the litigation. The president-elect said he plans to nominate Paul Atkins, a former SEC commissioner and pro-business conservative, to succeed Mr. Gensler.
Daniel Richman, a professor at Columbia Law School who specializes in criminal law, said the lawsuit appears to be part of a pattern of cases filed by Biden administration appointees “on their way out.”
It will be up to the new government and the appointees of Mr. Trump to decide whether to “fall back and withdraw” cases like the one against Mr. Musk, he said.
The SEC and the Consumer Financial Protection Bureau have filed a flurry of lawsuits in the final days of the Biden administration. As in the case against Mr. Musk, it’s unclear how these last-minute actions will go under the new administration.
The SEC filed suit against Mr. Musk on Tuesday after the close of business on the East Coast without the usual fanfare associated with a major case. The press release announcing the filing did not include a quote from Mr. Gensler or any other top agency official – a rarity for an action against a high-profile businessman.
Mr. Musk is at the side of Mr. Trump almost every day since the presidential election. She lives all but full time at the residence and clubhouse of Mr. Trump at Mar-a-Lago in Florida and attends meetings and events with the president-elect.
Mr. Trump also appointed Mr. Musk as co-chairman of a government task force aimed at finding ways to cut the federal budget.
The SEC is continuing its ongoing investigation of Mr. Musk for years, starting shortly after he announced in April 2022 that he had amassed a controlling stake in Twitter.
Although Mr. Musk initially said in an SEC disclosure that he had planned to be a passive shareholder in Twitter, quickly pivoted and made an offer to buy it outright for $44 billion. In July 2022, it tried to pull out of the market, but the company sued to force the deal to go through. Mr. Musk completed his purchase in October and later changed the company’s name to X.
The SEC fought Mr. Musk to compel his testimony in the case. In October 2023, the agency sued him in an attempt to force him to testify about his stock purchases. Mr. Musk appeared for deposition a year later. The billionaire also agreed to pay nearly $3,000 to reimburse the Securities and Exchange Commission for travel expenses it incurred when it sent its officials to take his deposition.
But in November, a federal judge in San Francisco rejected the SEC’s request to sanction Mr. Mask The next day, in a post on X, Mr. Musk mocked the agency with a crude joke.
The acquisition of Twitter by Mr. Musk has been the subject of numerous lawsuits and investigations by federal authorities. The Federal Trade Commission investigated whether X had the resources to protect user privacy after it laid off much of its staff and several senior executives responsible for privacy and security resigned.
This agency also tried to depose Mr. Mask Former Twitter shareholders also sued Mr. Musk, accusing him of fraud in a case related to the late disclosure of his stake in the company.
