Elon Musk accused by US regulator of bilking Twitter investors out of millions

NEW YORK – Mr Elon Musk cheated Twitter shareholders out of more than US$150 million (S$205 million) by waiting too long to disclose his growing stake in the company as he prepared a takeover bid, the US Securities and Exchange Commission (SEC) claimed in a lawsuit filed days before the Trump administration takes over.

The agency’s complaint, which was immediately disputed by a lawyer for Mr Musk, accuses the billionaire of failing to promptly report that he had amassed more than 5 per cent of the social media platform’s stock in early 2022 – a revelation that would have sent the stock’s price up.

“Because Musk failed to timely disclose his beneficial ownership, he was able to make these purchases from the unsuspecting public at artificially low prices,” the regulator said in its civil suit filed in federal court in Washington, DC.

“Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm.”

Mr Alex Spiro, a lawyer for Mr Musk, said the action is “an admission” that the SEC cannot bring an “actual case” because Mr Musk “has done nothing wrong and everyone sees this sham for what it is”.

“The SEC’s multi-year campaign of harassment against Mr Musk culminated in the filing of a single count ticky-tak complaint against Mr Musk under Section 13(d) for an alleged administrative failure to file a single form – an offence that, even if proven, carries a nominal penalty,” Mr Spiro said in a statement. 

Trump supporter

The world’s richest person has become one of Donald Trump’s biggest supporters and closest advisers in recent months. The President-elect has tasked Mr Musk, along with Mr Vivek Ramaswamy, with a broad government cost-cutting initiative. Mr Musk has also joined Trump in conversations with foreign officials.

SEC has been probing Mr Musk’s investment in Twitter since 2022, pressing him to explain why he had not disclosed his stake in Twitter within the correct timeframe. 

Mr Musk has had a strained relationship with the regulator, which sued him for securities fraud in 2018 after he tweeted that he had “funding secured” to take electric carmaker Tesla private, leading to a surge in the company’s shares. 

He agreed to a settlement in the case, with him and Tesla each paying a US$20 million penalty and him stepping down as the company’s chairman.

Mr Musk also faces investor litigation accusing him of hiding his acquisition of Twitter shares.

The lawsuit against Mr Musk is likely to be one of the more contentious final acts of the SEC under Mr Gary Gensler, its departing chair. It could also be undercut in just a few days, when Trump appoints new leadership to take charge of the regulator.

With Mr Gensler stepping down with the inauguration of Trump on Jan 20, it is unclear whether incoming regulators will pursue the litigation. Mr Trump has said he intends to nominate Mr Paul Atkins, a former SEC commissioner and pro-business conservative, to succeed Mr Gensler.

Professor Daniel Richman, who specialises in criminal law at Columbia Law School, said the lawsuit appeared to be part of a pattern of matters being filed by Biden administration appointees “on their way out”.

It will be up to the new administration and Trump’s appointees to decide whether to “back off and withdraw” cases like the one against Mr Musk, he said. BLOOMBERG, NYTIMES