Jonathan Stempel
(Reuters) - Elon Musk was sued on Tuesday by the U.S. Securities and Exchange Commission (SEC), which accused the world's richest man of waiting too long to disclose in 2022 that he had amassed a large stake in Twitter , and Twitter was the social media company he later acquired.
In a complaint filed in federal court in Washington, D.C., the SEC said Musk violated federal securities laws because he waited 11 years to disclose his initial purchase of 5% of Twitter's common stock.
An SEC regulation requires investors to disclose information within 10 calendar days, and if Musk's shareholding exceeds 5%, the information must be disclosed by March 24, 2022.
The SEC said Musk purchased more than $500 million in Twitter stock at artificially low prices at the expense of unsuspecting investors, eventually disclosing his purchases on April 4, 2022, when he Owns 9.2% of shares.
The U.S. Securities and Exchange Commission said Twitter's stock price rose more than 27% after the news was disclosed.
Tuesday's lawsuit seeks to force Musk to pay civil penalties and return undeserved profits.
Musk eventually acquired Twitter for $44 billion in October 2022 and renamed it X.
Alex Spiro, a lawyer for Musk, said in an email that the SEC lawsuit was the culmination of a "years-long campaign of harassment" by the regulator against his client.
"Today's action is the SEC's admission that they cannot bring an actual case," he said. "Mr. Musk did nothing wrong and everyone saw this scam for what it was."
Spiro added that the lawsuit only concerns "alleged administrative failure to submit a single form — which, even if proven, would be subject to a nominal penalty."
Other lawsuits over Twitter purchases
Musk, an adviser to U.S. President-elect Donald Trump, is worth $417 billion through businesses including electric car maker Tesla and rocket company SpaceX, according to Forbes magazine.
According to Forbes, his net worth is nearly twice that of Amazon founder Jeff Bezos, who ranks second in the world with a fortune of $232 billion.
The U.S. Securities and Exchange Commission (SEC) sued Musk six days before Trump's January 20 inauguration.
Securities and Exchange Commission Chairman Gary Gensler will resign that day, and Paul Atkins, Trump's nominee to replace him, is expected to review many of Gensler's rules and enforcement actions.
Musk is also being sued in Manhattan federal court by former Twitter shareholders over the late disclosure.
Under the circumstances, 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 been at odds with the SEC, including when the SEC sued him in 2018 over his Twitter posts about potentially taking Tesla private and having received funding.
He settled the lawsuit by paying a $20 million civil penalty, agreeing to let Tesla lawyers review some Twitter posts in advance and relinquishing his role as Tesla chairman.
The U.S. Securities and Exchange Commission (SEC) also sought to impose sanctions on Musk last September after he missed a court-ordered deposition in connection with the Twitter investigation so he could attend the launch of SpaceX's Polaris Dawn mission from Cape Canaveral, Florida. SK imposes sanctions.
A federal judge in San Francisco denied the request because Musk later testified and agreed to pay the SEC's travel expenses.
The case is SEC v. Musk, U.S. District Court for the District of Columbia, No. 25-00105.
(Reporting by Jonathan Stempel in New York; Additional reporting by Chris Prentiss; Editing by Stephen Coates)