SEC Files Lawsuit Against Elon Musk for Refusing to Testify in Twitter Stock Investigation

Written by The Anand Market

Updated on:

In a recent development, the U.S. Securities and Exchange Commission (SEC) has taken legal action against Tesla CEO Elon Musk over his refusal to testify in an ongoing investigation related to his Twitter stock purchases and statements regarding the $44 billion takeover of the social media platform.

The SEC filed a lawsuit in a California federal court, revealing that it is conducting a non-public investigation into whether Musk violated federal securities laws in connection with his Twitter stock acquisitions and statements made in 2022 concerning Twitter. The regulator accused Musk of failing to comply with a subpoena issued on September 15, demanding his testimony.

Alex Spiro, an attorney representing Elon Musk, responded to the SEC’s actions, stating, “The SEC has already taken Mr. Musk’s testimony multiple times in this misguided investigation — enough is enough.”

The investigation revolves around Musk’s acquisition of a 9.2% stake in Twitter (now renamed X) in early 2022, prior to his bid for the company at $54.20 per share in October of that year. This level of ownership triggered disclosure requirements.

sec files lawsuit against elon musk for refusing to testify in twitter stock investigation
Sec Files Lawsuit Against Elon Musk

In April 2022, the SEC sent Musk a letter inquiring about his failure to make the necessary filing by a late March deadline and his initial indication that he would be a passive investor. Additionally, the SEC scrutinized a tweet from May 2022 in which Musk stated he could not proceed with the Twitter deal, citing concerns over bots on the platform. The SEC questioned why he had not formally notified investors of this “apparent material change.”

This legal clash is not the first time Musk has encountered regulatory issues. In 2018, he was sued for tweeting that he had “funding secured” to take Tesla private, ultimately reaching a settlement with the SEC. Subsequent disagreements with the regulator over the settlement’s terms have continued to strain the relationship.

Also Read:   Elon Musk's Failed Attempt to Take Over OpenAI in 2018

According to the SEC filing, the investigation into Musk’s Twitter-related activities began in April 2022, involving the collection of thousands of documents from third parties, including hundreds from Musk himself. Musk testified twice in July 2022 as part of this inquiry.

The lawsuit alleges that Musk initially agreed to testify once more but later informed SEC staff two days before his scheduled appearance that he would not comply, citing various objections, including concerns about the location of the testimony and references to a biography about him written by Walter Isaacson as potentially containing relevant information.

Elon Musk also declined to meet in Texas and rejected alternate dates in October and November, as detailed in the SEC’s filings. The lawsuit seeks to compel Musk to testify in the face of his ongoing refusal to do so.