By Jonathan Stempel
(Reuters) – Elon Musk was sued on Tuesday by the U.S. Securities and Exchange Commission, which accused the world’s richest man of waiting too long to disclose in 2022 that he had acquired a large stake in Twitter, the social network he later bought.
In a lawsuit filed in federal court in Washington, the SEC said Musk violated federal securities law by waiting 11 days too long to announce his initial purchase of 5% of Twitter’s common stock.
The SEC rule requires investors to make the announcement within 10 calendar days, or by March 24, 2022 in Musk’s case, of crossing the 5% ownership threshold.
The SEC said Musk bought more than $500 million in Twitter stock at artificially low prices from unsuspecting investors before finally disclosing his purchases on April 4, 2022, by which time he owned a 9.2% stake.
Twitter’s share price rose more than 27% after the announcement, the SEC said.
Tuesday’s lawsuit seeks to force Musk to pay a civil penalty and forfeit profits he didn’t deserve.
Musk eventually bought Twitter for $44 billion in October 2022 and renamed it X.
Alex Spiro, Musk’s lawyer, called the SEC’s complaint in an email the culmination of a “year-long campaign of harassment” by regulators against his client.
“Today’s action is an admission by the SEC that they cannot bring a real case,” he said. “Mr. Musk has done nothing wrong and everyone sees this fraud for what it is.”
Spiro added that the lawsuit is about a mere “alleged administrative failure to file a single form — an offense that, even if proven, carries a nominal penalty.”
OTHER LAWSUITS RELATING TO PURCHASES ON TWITTER
Musk, an adviser to US President-elect Donald Trump, is worth $417 billion, according to Forbes magazine, through businesses such as electric car maker Tesla (NASDAQ: ) and rocket company SpaceX.
He is worth nearly twice as much as Amazon.com (NASDAQ: ) founder Jeff Bezos, the world’s second-richest person at $232 billion, Forbes reported.
The SEC sued Musk six days before Trump’s Jan. 20 inauguration.
Securities and Exchange Commission (SEC) Chairman Gary Gensler is stepping down that day, and Paul Atkins, who Trump nominated to succeed him, is expected to review many of Gensler’s rules and enforcement measures.
Musk was also sued by former Twitter shareholders in Manhattan federal court over the late disclosure.
In that case, Musk said it was implausible to believe he wanted to defraud other shareholders, and that “all indications” were that his delay was a mistake.
Musk has long clashed with the SEC, including after it sued him in 2018 over his Twitter posts about possibly taking Tesla private and securing funding for it.
He settled the suit by paying a $20 million civil penalty, agreeing to have Tesla’s lawyers pre-screen some Twitter posts and stepping down from his role as Tesla chairman.
The SEC also sought sanctions against Musk after he missed court-ordered testimony in the Twitter investigation last September so he could attend the launch of SpaceX’s Polaris (NYSE: ) Dawn mission at Florida’s Cape Canaveral.
A federal judge in San Francisco denied that request because Musk later testified and agreed to pay the SEC travel expenses.
The case is SEC v. Musk, U.S. District Court, District of Columbia, No. 25-00105.
