SEC Sues Elon Musk Over Twitter Stake Disclosure Violation

The U.S. Securities and Exchange Commission (SEC) has officially filed a lawsuit against Elon Musk, accusing the Tesla CEO of failing to disclose his stake in Twitter on time, allowing him to purchase shares at “artificially low prices,” saving him up to $150 million.

Violation of Stake Disclosure Rules

According to SEC rules, investors who own more than 5% of a company’s shares must report this within 10 days. However, Musk disclosed his Twitter stake 21 days after crossing the 5% threshold, violating the required reporting timeframe.

Elon Musk’s Reaction

Musk quickly took to social media to criticize the SEC, calling the agency a “totally broken organization.” He also accused the SEC of carrying out a “sham” and “harassment campaign” against him, instead of focusing on actual crimes that remain unpunished.

Impact on Twitter Shares and the Acquisition Deal

After Musk publicly disclosed his Twitter stake on April 4, 2022, the company’s stock price surged by more than 27%. In October 2022, Musk completed his $44 billion acquisition of Twitter and subsequently rebranded the platform as “X.” The deal attracted significant market attention and sparked debates about the platform’s future direction.

SEC Seeks Musk to Return “Unjust” Profits

The SEC’s lawsuit, filed in a federal court in Washington D.C., asks the court to order Musk to return “unjust” profits and pay a fine for violating disclosure regulations. This action is part of the SEC’s broader effort to maintain fairness in the stock market and protect investors’ interests.

Musk and SEC’s History of Conflict

This is not the first time Musk has clashed with the SEC. In 2018, Musk was sued for misleading investors with claims that he had “secured funding” to take Tesla private. Musk later settled the case, agreeing to step down as Tesla’s chairman and accepting restrictions on his social media use regarding the company.

Rising Tensions and the Future of SEC Under Gary Gensler’s Leadership

Tensions between Musk and the SEC continue to escalate, with Musk criticizing the agency for actions that he believes stifle individual freedom and hinder the growth of innovative companies. This lawsuit also comes amid the announcement that SEC Chairman Gary Gensler will resign in January 2025, following the potential re-election of Donald Trump. Gensler and Musk have had several disagreements, particularly over the regulation of large tech companies, making the future of the SEC a subject of keen interest