Elon Musk, the wealthiest individual globally, is facing a lawsuit from the U.S. Securities and Exchange Commission (SEC), which is seeking to enforce his testimony in connection with an inquiry into his acquisition of social media behemoth Twitter for $44 billion. The court filing on Thursday reveals that this investigation, intensifying an ongoing dispute between Musk and the SEC, focuses on whether Musk violated federal securities regulations in 2022 when he acquired Twitter shares and renamed it X, along with his statements and SEC submissions linked to the acquisition.
In May 2022, the SEC announced that it was investigating Elon Musk’s disclosure of his ownership stake in Twitter, raising concerns about whether he had filed the necessary documentation.
However, in a filing on Thursday, the SEC revealed that it had issued a subpoena to Musk in May 2023, compelling him to provide testimony at the SEC’s San Francisco office. Musk initially agreed to appear on September 15. However, just two days before the scheduled appearance, Musk raised what the SEC described as “various unfounded objections” and informed the SEC that he would not be appearing as agreed.
Musk declined the SEC’s suggestions to hold the deposition in Texas either in October or November.
One of his objections was that he believed the SEC’s actions were aimed at causing him undue distress, and he stated that his legal team required time to review possibly pertinent information found in a biography of Musk that was released last month, as outlined in the SEC’s filing.
Elon Musk, the CEO of SpaceX and Tesla and the proprietor of Twitter, makes a gesture as he participates in the Viva Technology conference focused on innovation and startups at the Porte de Versailles exhibition center in Paris, France, on June 16, 2023. REUTERS/Gonzalo Fuentes/File Photo Obtain Licensing Rights
The filing also noted that Musk has submitted documents related to the investigation to the SEC and had previously given testimony via video conference in July of the previous year.
Alex Spiro, an attorney representing Musk, issued a statement expressing that the SEC has already obtained testimony from Mr. Musk on multiple occasions during this ill-conceived investigation, and he believes it’s time to put an end to it.
In a press release, the SEC stated that it is seeking Mr. Musk’s testimony to acquire information that the SEC does not already possess but is relevant to its legitimate and legal investigation. An SEC spokesperson declined to provide further comments.
Musk initially acquired a substantial minority stake in Twitter, which he publicly disclosed in April 2022. His disclosure filing was delayed, and he initially indicated that he intended to be a passive investor, implying that he did not plan to take control of Twitter or influence its management decisions.
However, he later accepted and subsequently declined a seat on Twitter’s board. In late April, Musk announced his intention to purchase the company for $44 billion but later attempted to back out of the deal, alleging that Twitter had not fully disclosed the extent of bot activity on its platform.
Facing a lawsuit that aimed to force him to complete the acquisition, Musk ultimately finalized his purchase of Twitter in late October 2022.
MUSK-SEC FEUD
Thursday’s court filing represents the latest clash between Musk and the SEC, who have been in conflict since Musk’s 2018 tweet where he claimed he intended to take his electric car company, Tesla (TSLA.O), private with secured funding. Since then, Musk has frequently criticized the SEC, which has initiated multiple investigations into his activities over the years.
Musk posted on X, stating, “A comprehensive overhaul of these agencies is sorely needed, along with a commission to take punitive action against those individuals who have abused their regulatory power for personal and political gains.”
Howard Fischer, a partner at the law firm Moses & Singer and a former SEC official, described Musk’s refusal to testify in September as highly unusual, stating, “I have never heard of a senior executive with positions at public companies failing to appear.”
The lawsuit filed on Thursday adds to Musk’s legal challenges. Reuters had previously reported that the Justice Department is investigating Tesla over its self-driving claims. Additionally, federal prosecutors in New York are conducting an investigation related to Musk’s corporate benefits and assertions concerning vehicle driving range.
Reporting by Shivansh Tiwary in Bengaluru; Tom Hals in Wilmington, Delaware; Chris Prentice in New York; Michelle Price in Washington; and Sheila Dang in Austin; Editing by Megan Davies, Shinjini Ganguli, and Lisa Shumaker.
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