Elon Musk was sued on Tuesday by the Securities and Exchange Commission for having failed to timely disclose purchasing more than 5% of Twitter’s common stock in March 2022 — a parting shot at the mogul by lame-duck SEC boss Gary Gensler.
In a complaint filed in Washington, DC, federal court, the SEC said the delay allowed Musk to continue buying Twitter shares at artificially low prices, allowing him to underpay by at least $150 million.
A lawyer for Musk said the billionaire did nothing wrong and called the SEC case a “sham.”
The SEC wants Musk — who has since rebranded Twitter to X — to pay a civil fine and disgorge profits he was not entitled to.
Alex Spiro, a lawyer for Musk, in an email said: “Mr. Musk has done nothing wrong and everyone sees this sham for what it is.”
The Wall Street sheriff had approached the world’s richest man with a take-it-or-leave-it settlement offer to pay an eye-popping $263 million in early December, giving Musk 48 hours to respond, sources close to the situation told The Post.
Musk revealed the settlement talks in a Dec. 12 post on X and brushed off the demand, but never said how much Gensler was seeking.
“Oh Gary, how could you do this to me?” Musk wrote in the Dec. 12 post.
The SEC declined to comment beyond the suit.
The lawsuit comes less than three weeks after Spiro told the SEC that the $263 million settlement offer was an “exorbitant and unprecedented amount,” according to a letter the lawyer sent to the agency that was viewed by The Post.
“For the SEC staff to recommend that the Commission authorize a litigated action to seek over $263 million in monetary relief in a case in which the staff acknowledges that they are not alleging intent, willfulness, or investor harm is inherently improper and punitive,” Spiro alleged in the Dec. 27 letter.
An SEC rule requires investors like Musk to disclose within 10 calendar days when they cross a 5% ownership threshold.
The SEC said Musk did not disclose his stake until April 4, 2022, 11 days after the deadline, by which time he owned more than 9% of Twitter’s shares.
Twitter’s share price rose more than 27% following that disclosure, the SEC said.
Musk eventually purchased Twitter for $44 billion in October 2022, and renamed it X.
Spiro admitted that Musk was late with the so-called 13(d) filing to the SEC, according to his letter.
But he took issue with the SEC’s demand of $178 million for the late filing, $45 million in interest and a $40 million penalty.
“If you insist on proceeding to litigation, I assure you that Mr. Musk will be seeking discovery into every other Section 13(d) matter investigated, recommended, filed, and resolved by the Commission over the last three years, which will prove the arbitrary and capricious nature of the staff’s recommendation here,” Spiro wrote.
Former SEC Prosecutor David Chase, who is not involved in the case, said $263 million for a disclosure violation, a 13(d), is “extraordinarily high”.
“I don’t care if they are charging Elon Musk or Santa Claus that is an extraordinary amount.”
Chase pointed out that the SEC on Sept. 25 settled charges against 25 entities and individuals for similar violations including Alphabet and Goldman totaling $3.8 million.
However, he did acknowledge that the $263 million penalty would be consistent if there was a fraud component to the case.
Musk, who has become part of President-elect Donald Trump’s inner circle, will likely ask incoming SEC chair Paul Atkins to withdraw the case.
With Post wires
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