SEC Accuses Elon Musk For Delayed Twitter Stake Disclosure, Cheating Of $150M

The US Securities and Exchange Commission (SEC) has accused Elon Musk of cheating Twitter shareholders out of more than $150 million by waiting too long to disclose his growing stake in the company as he prepared a takeover bid. The lawsuit comes days before President-elect Donald Trump's administration takes over, Bloomberg reported.

SEC Vs Musk : Accusations

A lawyer for Musk immediately disputed the SEC's complaint. The lawsuit accuses the billionaire of failing to promptly report that he had amassed more than 5 per cent of the social-media platform’s stock in early 2022. If true, the revelation would have sent the stock’s price up.

“Because Musk failed to disclose his beneficial ownership timely, he was able to make these purchases from the unsuspecting public at artificially low prices,” the regulator said in its civil suit filed in federal court in Washington, DC. “Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm.”, Bloomberg reported

Alex Spiro, a lawyer for Musk, said the action is “an admission” that the SEC cannot bring an “actual case,” because Musk “has done nothing wrong and everyone sees this sham for what it is.”

“The SEC’s multi-year campaign of harassment against Mr. Musk culminated in the filing of a single-count ticky tak complaint against Mr. Musk under Section 13(d) for an alleged administrative failure to file a single form — an offense that, even if proven, carries a nominal penalty,” Spiro said in a statement, Donald Trump reported.

The regulator has been probing Musk’s investment in Twitter since 2022, pressing him to explain why he hadn’t disclosed his stake in Twitter within the correct timeline.

SEC attorneys in December asked Musk to pay more than $200 million to settle the allegations that he failed to properly disclose his Twitter investment, according to a letter by his lawyers sent to the agency last month reviewed by Bloomberg News.

In the letter, Spiro said the SEC is seeking the relief but isn’t accusing Musk of acting willfully or with the intent to mislead investors.

The SEC declined to comment.

Spiro called the penalty he said the SEC proposed “inherently improper and punitive.” Spiro said in cases of similar violations by other individuals, the SEC has sought a “reasonable” penalty of typically $100,000 or less, Bloomberg reported.

Shareholder Trial Against Tesla And Elon Musk
 

In December 2024, Musk publicly previewed that regulators were investigating him, posting a letter by Spiro on X that said the agency had “reopened” a probe into his brain-computer interface company, Neuralink Corp.

The letter also said the agency was getting ready to take action against him over his investment in Twitter. It said SEC staff the day before had issued a “settlement demand that required Mr. Musk within 48 hours to either accept a monetary payment or face charges on numerous accounts.”

Musk has previously been accused by the SEC, which sued him for securities fraud in 2018 after he tweeted that he had “funding secured” to take electric carmaker Tesla Inc. private, leading to a surge in the company’s shares. Musk agreed to a settlement in the case, with the billionaire and Tesla each paying a $20 million penalty and Musk stepping down as the company’s chairman.

‘Twitter Sitter’ 

The Supreme Court later rejected an appeal from Musk in his “Twitter sitter” case, leaving in place a deal to have an in-house attorney pre-approve social media posts about Tesla.

By March 2022, Musk had acquired beneficial ownership of more than 9 per cent of Twitter’s outstanding common stock. This triggered reporting requirements due within 10 days of the purchase. Musk filed the report 11 days later, making the company’s stock price surge by 27 per cent from the day before, according to the lawsuit.

The complaint alleges that Musk repeatedly ignored advice to disclose his stake, after he passed the 5 per cent threshold.

The SEC asked the court to direct Musk to pay a civil penalty and return profits, which the agency claims he reaped unjustly from his stock purchases.

Musk also faces investor litigation accusing him of hiding his acquisition of Twitter shares.

The case is Securities and Exchange Commission v. Musk, 25-cv-00105, US District Court, District of Columbia.

(with Bloomberg inputs)