Political Observer’s lamentation.
Jan 17, 2025
U.S. securities regulators sued Elon Musk in federal court in Washington on Tuesday in an enforcement action arising from his $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, is likely to be one of the more contentious final acts of the Securities and Exchange Commission under Gary Gensler, its departing chair. It could also be undercut in just a few days, when Mr. Trump appoints new leadership to take charge of the regulator.
The S.E.C. contends that in buying Twitter in 2022, Mr. Musk violated securities laws by amassing a large stock position in the social media company without filing the proper notification. The complaint said he had waited 11 days before filing the required disclosure with the S.E.C.
The regulatory filings are required so investors in the marketplace can monitor the moves of large investors and potential takeover bids.
Because Mr. Musk did not disclose his position, he was able to continue buying Twitter stock at an artificially low price, the S.E.C. said in its lawsuit. The move “allowed him to underpay by at least $150 million” for the additional shares before he belatedly disclosed his stake, the lawsuit continued.
Over the past few weeks, Mr. Musk had taunted the S.E.C. in posts on X about the potential for filing a lawsuit. In December, he shared a letter that his lawyer, Alex Spiro, had sent to the agency, rejecting a settlement offer in the case.
On Tuesday, Mr. Spiro denounced the regulator’s latest filing.
“Today’s action is an admission by the S.E.C. that they cannot bring an actual case, because Mr. Musk has done nothing wrong and everyone sees this sham for what it is,” Mr. Spiro said in a statement. The agency had waged a “multiyear campaign of harassment” against Mr. Musk but filed “a single-count ticky-tack complaint,” Mr. Spiro added.
This is the third time the S.E.C. has gone to court with Mr. Musk. The first lawsuit, during Mr. Trump’s first term in office, arose from inappropriate market-moving posts on social media in which Mr. Musk mused about taking his electric car company, Tesla, private.
Before filing the lawsuit on Tuesday, the S.E.C. had also sought to force Mr. Musk to comply with a subpoena seeking to take his deposition.
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With Mr. Gensler stepping down with the inauguration of Mr. Trump on Monday, it is unclear whether incoming regulators will pursue the litigation. The president-elect has said he intends to nominate Paul Atkins, a former S.E.C. 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 appeared to be part of a pattern of matters being filed by Biden administration appointees “on their way out.”
It will be up to the new administration and Mr. Trump’s appointees to decide whether to “back off and withdraw” cases like the one against Mr. Musk, he said.
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Political Observer
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