Elon Musk was sued on Tuesday by the U.S. Securities and Exchange Commission (SEC), which accused the billionaire of delaying the disclosure of his substantial stake in Twitter in 2022. Musk later went on to acquire the social media platform.
In a complaint filed in federal court in Washington DC, the SEC alleged that Musk violated federal securities laws by waiting 11 days beyond the required timeframe to reveal his initial purchase of 5% of Twitter’s common shares.
An SEC rule requires investors to disclose within 10 calendar days, or by March 24, 2022 in Musk’s case, when they cross a 5% ownership threshold.
The SEC said that at the expense of unsuspecting investors, Musk instead bought more than $500 million of Twitter shares at artificially low prices before finally revealing his purchases on April 4, 2022, by which time he owned a 9.2% stake.
Twitter’s share price rose more than 27% following that disclosure, the SEC said.
Tuesday’s lawsuit seeks to force Musk to pay a civil fine and disgorge profits he didn’t deserve.
Musk eventually purchased Twitter for $44 billion in October 2022, and renamed it X.
Alex Spiro, a lawyer for Musk, in an email called the SEC lawsuit the culmination of the regulator’s “multi-year campaign of harassment” against his client.
“Today’s action is an admission by the SEC that they cannot bring an actual case,” he said. “Mr. Musk has done nothing wrong and everyone sees this sham for what it is.”
Spiro added that the lawsuit addresses a mere “alleged administrative failure to file a single form–an offense that, even if proven, carries a nominal penalty.”
(With inputs from Reuters)