He’s the world’s richest person, buddies with President-elect Donald Trump and now faces a fresh US regulatory lawsuit that raises questions about how the incoming administration will handle the case.
Elon Musk’s latest fight with the US Securities and Exchange Commission hinges on a relatively straightforward accusation that the billionaire missed a deadline for disclosing his growing stake in Twitter before he tried to take over the social media platform in 2022. By the agency’s estimate, that cost Twitter shareholders who unwittingly sold too soon more than $150 million.
But with Musk’s attorneys blasting the SEC’s case filed this week at federal court in Washington, DC, and Trump’s nominees signalling a different approach to policing markets, how the agency will resolve this one is anything but predictable.
“If this were any other president, and any other defendant other than Trump and Musk, 100% this case would go forward,” said David Slovick, a partner at Barnes & Thornburg and a former SEC enforcement attorney. “Because this is Trump and Musk, all bets are off.”
Trump may not want one of his top allies to face a high-profile lawsuit, but he also can’t just make it disappear on day one, said John Coffee, a professor at Columbia Law School.
Any decision to dismiss a case would be up to SEC commissioners. Because the case is so new, the agency could drop it without a judge’s involvement, according to federal court rules.
That process could take some time, though, as a new administration comes into office. Senate confirmation hearings for Trump’s pick to lead the SEC, Paul Atkins, haven’t been scheduled yet.
Atkins didn’t immediately respond to a request for comment.
Furthermore, the agency sweeping a high-profile case under the rug could have consequences, according to Coffee.
“There will be a political interpretation that the Trump administration is protecting Trump’s good buddy,” he said.
Musk has tussled with financial regulators for years, including during Trump’s first term as president. The SEC sued him for securities fraud in 2018 after he tweeted that he had “funding secured” to take electric carmaker Tesla Inc. private, leading to a surge in the company’s shares.
Musk and Tesla settled the case by paying $20 million apiece to the SEC. Musk also had to step down as the company’s chairman.
Twitter lawsuit
The Twitter case brought Musk back into the SEC’s crosshairs. The regulator in 2022 started probing the billionaire about his stock purchases and why he didn’t promptly make clear how big of a stake he’d acquired before his highly public takeover bid of the company, which has been renamed X.
Musk was supposed to have filed a special form indicating that he’d accumulated at least 5% of the company within 10 days of crossing the threshold. Instead, he submitted a different filing. He then provided the correct form saying he amassed 9% of Twitter shares 11 days after the report was due, according to the agency.
“It’s pretty cut-and-dried. It should have been resolved in a year,” said Brian Quinn, professor at Boston College Law School. “The fact that it dragged on for so long strikes me as unusual.”
Musk himself played a role in the delay. In September, he stood up SEC attorneys who flew to Los Angeles for his deposition in the case, choosing to attend a rocket launch for his SpaceX company instead. Musk offered a few thousand dollars to cover the government lawyers’ travel expenses. The SEC balked.
The SEC claims Musk essentially stockpiled shares at an unfair discount behind the scenes. Once he properly disclosed his purchase, Twitter shares surged 27%. The regulator also alleged that Musk was in possession of material nonpublic information while amassing Twitter shares, but it didn’t accuse him of insider trading.
“They could have charged it in other ways that are much more controversial,” said Sandra Hanna, a partner at Steptoe. “It’s a smartly charged case that would be difficult to turn back on.”
Musk’s attorney, Alex Spiro, accused the SEC of pursuing “ticky tak” violations that ordinarily carry nominal penalties. Musk “has done nothing wrong and everyone sees this sham for what it is,” the lawyer said in a statement Tuesday.
SEC attorneys in December asked Musk to pay more than $200 million to settle the allegations, according to a letter by his lawyers sent to the agency last month and reviewed by Bloomberg News.
Last year, Alphabet Inc. paid $750 000 to settle allegations that it failed to file timely reports and was one of almost two dozen firms and individuals that got cited in a September sweep for not submitting proper reports about their holdings and transactions.
