As time runs out for the Biden administration, the U.S. Securities and Exchange Commission has sued Elon Musk in federal court. The statute at hand is relatively simple. The moment of complaint is more complicated.
The SEC complaint focuses on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to notify the agency that he had acquired more than 5 percent of the company’s common stock in a period of 10 calendar days. If true, that delay would violate federal security laws. “As a result, Musk was able to continue purchasing shares at artificially low prices,” the SEC states. alleges“allowing him to underpay by at least $150 million for the shares he purchased after his beneficial ownership report expired.” The SEC has requested a jury trial.
All of this should be pretty simple. “It seems like a simple case about a clear violation of a well-established SEC rule,” says James Park, a professor at UCLA School of Law who specializes in securities regulation and corporate law. Either you submit your paperwork within 10 days or you don’t; the SEC claims Musk didn’t do it. He acquired enough shares to cross that threshold on March 14 of that year, the agency alleges, and did not publicly disclose his ownership until April 4. (The SEC alleges that Musk was technically 11 days late, as he continued to purchase shares through March 24.)
And yet, it took almost three years for the SEC to bring a case. “The question is why are they doing it now,” says David Rosenfeld, former co-director of the SEC’s law enforcement office in New York and currently a professor at Northern Illinois University School of Law. “The only plausible answer is that they want to do it before the administration changes.” Rosenfeld notes that he did not thoroughly review the SEC complaint.
That shift in executive power, coming in less than a week, creates a more favorable regulatory environment for Musk, who donated hundreds of millions of dollars to political action committees supporting Donald Trump’s presidential campaign and reportedly He has been a close advisor to the president-elect. during the transition period. Current SEC Chairman Gary Gensler will likely be replaced by Trump nominee Paul Atkins, who is widely seen as a supporter of a lighter regulatory touch.
Musk’s lawyer, Alex Spiro, says he believes the complaint is a final step. “As the SEC withdraws and leaves office, the SEC’s multi-year harassment campaign against Mr. Musk culminated in the filing of a single-count complaint against Mr. Musk,” he wrote in an email. electronic.
While the filing comes just before Trump’s inauguration on January 20, the investigation that led to this complaint has been years in the making. The agency had to subpoena Musk in May 2023 to obtain his testimony in the investigation and has said which Musk canceled two days before his testimony scheduled for September. a federal court sustained an earlier decision to force him to testify in May 2024; SEC lawyers flew to interview him on September 10, but he made them stand up once again to attend a SpaceX launch.