The US market watchdog, the Securities and Exchange Commission (SEC), filed a lawsuit against Elon Musk on Tuesday, the 14th of January, accusing him of failing to disclose in time that he had accumulated a stake in Twitter in 2022 when he acquired the social media company Twitter, which allowed him to buy shares at “artificially low prices”, according to Reuters and the BBC.
The complaint, filed in federal court in Washington, says Musk violated federal securities law, which requires investors to give notice within ten calendar days (in Musk’s case, by the 24th of March 2022) if their holdings exceed 5%.
“Mask’s violation caused substantial economic harm to investors,” the SEC’s complaint said.
The SEC said that, at the expense of unsuspecting investors, Musk bought more than 500 million US dollars of Twitter shares at artificially low prices before finally disclosing his purchases on the 4th of April 2022, by which time he owned 9.2% of the shares.
Following this disclosure, Twitter’s share price rose by more than 27%, the SEC said.
The lawsuit filed on Tuesday seeks to force Musk to pay a civil penalty and disgorge profits he did not earn.
Musk bought Twitter in October 2022 for 44 billion US dollars and renamed it “X”.
In an email, Alex Spiro, a lawyer for Musk, called the SEC’s action the culmination of a “multi-year campaign of harassment” by the regulator against his client.
“Today’s action is an admission by the SEC that they cannot prosecute,” he said. “Musk has done nothing wrong, and everyone can see that this is a sham.”
Spiro added that the action is only against “the alleged failure to file a single form – a violation that, even if proven, carries a nominal penalty.”
In a post on X, Musk called the SEC a “completely destroyed organisation”. He also accused the regulator of wasting time because “there are so many real crimes that go unpunished”.
According to Forbes magazine, Musk, who is an adviser to US President-elect Donald Trump, is worth 417 billion US dollars through companies such as Tesla and SpaceX.
The SEC sued Musk six days before Trump’s inauguration on the 20th of January.
Former Twitter shareholders have also sued Musk in Manhattan federal court for late disclosure of his large Twitter stake. Musk argued that the delay in making the announcement was a mistake and not an attempt to mislead shareholders.