Elon Musk slams SEC as ‘broken’ for ‘artificially’ creating $150 million in Twitter stock

Billionaire entrepreneur and Tesla CEO Elon Musk is fighting a lawsuit over the delay in disclosing a large stake in Twitter, now renamed X Company. , criticized the U.S. Securities and Exchange Commission (SEC).

The case marks the culmination of SEC scrutiny of Musk’s investment activities using social media platforms in 2022.

SEC’s claim

On January 14, the SEC argued that Musk did not meet the legal requirement to disclose that he acquired more than 5% of Twitter stock within the required 10 days.

Financial regulators noted that Musk had exceeded the 5% threshold by March 14, 2022, but Musk delayed filing disclosures until April 4, 11 days past the deadline.

According to the filing:

“Mr. Musk’s failure to timely disclose his beneficial ownership interests allowed him to make these purchases from the unsuspecting public at artificially low prices, but the prices did not include the “Investment purposes that did not yet reflect material, non-public information regarding the beneficial ownership of 5% or more of the common stock.” ”

The SEC said the delay in disclosure saved Mr. Musk more than $150 million, deprived other investors of potential financial gain, and caused financial harm to investors who sold their stocks during that period. he claimed.

Notably, a committee led by Gary Gensler noted that after Musk finally disclosed his holdings, Twitter’s stock price soared 27%, bringing his holdings to $2.89 billion. That’s what I did.

The SEC alleges these actions violate the Securities Exchange Act of 1934, which requires timely disclosure to prevent unjust enrichment and protect market integrity.

The European Commission asked the court to impose a civil penalty and force Musk to repay the profits he allegedly gained from late disclosure.

Musk slams SEC

On January 15, Musk publicly dismissed the lawsuit in a post on X, criticizing the SEC as an incompetent organization that prioritizes petty issues over addressing serious financial crimes.

According to him:

“(The SEC) is a completely broken organization. They spend their time on this crap when there are so many crimes that go unpunished.”

Some industry experts also question the SEC’s priorities in this case.

John Reed Stark, a former official in the SEC’s Internet Enforcement Division, said the investigation could be a waste of resources. He suggested that Musk’s lawyers may argue that Musk’s original intention was to secure a seat on Twitter’s board rather than pursue an outright acquisition.

Mr. Stark added:

“This lawsuit is as absurd as the 2008 SEC lawsuit against Mark Cuban, and a blatant attempt by Chairman Gensler to grab last-minute headlines just days before leaving office and foist it on President Trump. It seems just as absurd.”

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