SEC Sues Elon Musk over Alleged Securities Violations in Twitter Share Purchase

The United States Securities and Exchange Commission (SEC) has initiated legal action against billionaire entrepreneur Elon Musk, accusing him of breaching federal securities laws in his 2022 purchase of Twitter shares.

The SEC’s allegations were detailed in a court filing published on Tuesday, underscoring a contentious dispute over the acquisition process.

According to the regulator, Musk, who is widely recognised as the world’s richest man, failed to file a mandatory beneficial ownership report with the SEC in a timely manner.

The report was required after he acquired more than five per cent of Twitter’s outstanding common stock in March 2022.

The SEC contends that this omission allowed Musk to buy additional shares at “artificially low prices,” depriving sellers of fair market value and saving Musk an estimated $150 million.

“Defendant Elon Musk failed to timely file with the SEC a beneficial ownership report disclosing his acquisition of more than five per cent of the outstanding shares of Twitter’s common stock in March 2022, in violation of the federal securities laws,” the SEC said in its filing.

The filing alleges that Musk’s delayed disclosure enabled him to gain a financial advantage in subsequent transactions.

By withholding information about his growing stake in the social media giant, the regulator argues, Musk avoided alerting the market, thereby keeping share prices suppressed.

Musk, who rebranded Twitter as X following his takeover, has frequently been embroiled in controversies related to his leadership of the platform.

The SEC’s action adds to a litany of legal disputes surrounding the billionaire, including lawsuits from shareholders, former employees, and contractors.

Alex Spiro, an attorney representing Musk, dismissed the SEC’s lawsuit as baseless. In a statement to AFP, Spiro characterised the filing as a “sham” and part of a broader “multi-year campaign of harassment” by the SEC against his client.

“Today’s action is an admission by the SEC that…they cannot bring an actual case,” Spiro remarked, accusing the regulator of targeting Musk without substantive evidence.

This legal challenge comes amid growing backlash from shareholders, who have also filed a lawsuit against Musk.

They allege that his failure to disclose his five per cent stake within the SEC-mandated timeline caused financial harm to other investors.

Musk’s handling of Twitter – now X – has been a source of polarised debate. While some view his leadership as visionary, critics point to the platform’s declining user engagement and revenue under his management.