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The Securities and Exchange Commission (SEC) smacked billionaire Elon Musk with new charges related to his 2022 Twitter acquisition, just days before a friendlier federal administration takes over.
The agency on Tuesday accused Musk of underpaying investors in the social media company by at least $150 million by failing to properly disclose his ownership in the company under federal rules. He only revealed his Twitter holdings 11 days after the mandatory guidelines, allowing the Tesla (TSLA) and SpaceX CEO to keep prices “artificially low,” the SEC said in a lawsuit.
On the day he did file, Twitter stock jumped 27%. The day after, Musk disclosed that he had joined Twitter’s board of directors and owned more than 9% of the company’s shares. A few days later, shortly before he was set to officially join the board, he changed his mind and launched public attacks on the company.
Musk was later forced to buy Twitter for roughly $44 billion. Fidelity believes the company, now rebranded as X, is worth 72% less than what Musk paid for it, even after raising the value of its stake in October.
The agency’s lawsuit, filed in federal court in Washington, seeks to force Musk to pay a civil penalty as well as repay the funds he allegedly cheated investors out of. Musk is also facing a shareholder lawsuit filed in April 2022, which accused Musk of saving $143 million thanks to his late disclosure.
“Lawfare needs to stop,” Musk said on X early Wednesday. “Instead of fighting real crime, under the Democrats, citizens are prosecuted, while serious criminals run free. In fact many of the criminals are in the government. At least for another 5 days.”
In December, Musk criticized the SEC as “just another weaponized institution doing political dirty work,” while his lawyer criticized the SEC’s “harassment” of his client. The lawyer, Quinn Emmanuel’s Alex Spiro, also said that SEC staff had issued Musk a 48-hour settlement deadline to either accept a monetary fine or face charges over the long-standing probe into his Twitter acquisition.
The lead-up to the case has been rough for both the SEC and Musk. He has given testimony a few times in the SEC’s case, although the SEC had to sue him in 2023 to compel him to agree to give testimony a third time. A federal judge in November rejected the SEC’s bid to sanction Musk after he failed to appear for court-ordered testimony in September, although he did make an appearance the following month.
But Musk’s feud with the agency goes back to Donald Trump’s first administration. The SEC at the time went after Musk for tweeting about taking Tesla private at $420 per share and writing, “funding secured.”
As part of a settlement, Musk and Tesla each paid the SEC $20 million in fines and signed a consent decree that requires some of his tweets be reviewed by a company lawyer before they are posted. He failed to get the Supreme Court to hear his bid to appeal what he calls the SEC’s “muzzle” on his speech.
His Neuralink startup is also facing an SEC investigation, while a probe into Tesla and Musk over allegations of potential securities fraud or wire fraud was reportedly opened last year. The inquiry into Tesla is related to Musk’s comments about the company’s Autopilot and Full Self-Driving technology.
The SEC’s new case landed in federal court just days before SEC Chair Gary Gensler — a personal enemy of Musk — is set to leave alongside President Joe Biden’s administration on Monday.
The future of the case will likely fall to the expected SEC chair, Paul Atkins, who President-elect Trump has tapped to lead the agency and is critical of issuing large fines. Musk himself has a role to play in the administration as the leader of his own task force, providing recommendations on funding agencies like the SEC.
He reportedly will have his own office space in the Eisenhower Executive Office Building, which is adjacent to the White House, allowing him continued access to Trump. Musk has been renting a cottage at Trump’s Mar-a-Lago club in recent weeks so he can provide advice to the incoming president at his “Winter White House.”
