Elon Musk Sued by SEC! Accused of Defrauding X Investors Out of Millions

The US Securities and Exchange Commission (SEC) has filed a lawsuit accusing Elon Musk of defrauding Twitter (now X) shareholders of over $150 million. The lawsuit alleges that Musk deliberately delayed disclosing his acquisition of more than 5% of the social media platform's stock in early 2022. Such disclosure would likely have driven up the stock price as Musk prepared his takeover bid.

The SEC's civil lawsuit, filed in federal court in Washington, D.C., claims Musk's delayed disclosure allowed him to purchase additional shares at artificially suppressed prices. The lawsuit states:"By failing to timely disclose his beneficial ownership, Musk was able to acquire these shares at an unfairly low price from unsuspecting public investors. Investors who sold Twitter common stock during this time at the artificially depressed prices suffered substantial financial losses."

Musk's Legal Defense

Musk's lawyer, Alex Spiro, dismissed the allegations as baseless, calling the SEC's move "an admission" that it has no actual case. Spiro stated, "The SEC has been harassing Mr. Musk for years, and their latest effort revolves around a single alleged administrative failure to file a single form under Section 13(d) — a technical violation that, even if proven, would result in a nominal penalty."

Spiro criticized the SEC's proposed penalty as "grossly excessive and punitive," noting that in similar cases involving other individuals, the agency typically seeks fines of $100,000 or less. According to a letter sent last month by Musk's legal team to the SEC, the agency had demanded over $200 million to settle the allegations.

Musk's History with the SEC

This lawsuit marks another chapter in Musk's contentious relationship with the SEC. In 2018, the agency sued Musk for securities fraud after he tweeted that he had "funding secured" to take Tesla private, causing the company's stock to surge. Musk settled the case, agreeing to step down as Tesla's chairman and pay a $20 million fine, with Tesla also paying an additional $20 million penalty.

The current case underscores Musk's ongoing challenges with regulators as he navigates his high-profile ventures and controversial business practices.