“Sham”: Elon Musk sued by SEC over late disclosure of Twitter stake in parting shot by CEO

The billionaire has been sued after allegedly failing to timely disclose his ownership of Twitter stock, but his lawyer claims he “has done nothing wrong”.

Elon Musk was sued on Tuesday by the Securities and Exchange Commission for having failed to timely disclose purchasing more than five per cent 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 Mr Musk to continue buying Twitter shares at artificially low prices, allowing him to underpay by at least $150 million, the New York Post reports.

A lawyer for Mr Musk said the billionaire did nothing wrong and called the SEC case a “sham.”

The SEC wants Mr 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 Mr Musk, in an email said: “Mr. Musk has done nothing wrong and everyone sees this sham for what it is.”

The Securities and Exchange Commission sued Elon Musk for having failed to timely disclose purchasing more than five per cent of Twitter’s common stock in March 2022. Picture: Anna Moneymaker/Getty Images/AFP

MORE: Elon Musk’s bizarre move with ex-partner Grimes exposed

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 Mr Musk 48 hours to respond, sources close to the situation told The Post.

Mr Musk revealed the settlement talks in a December 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?” Mr Musk wrote in the December 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 authorise 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, wilfulness, or investor harm is inherently improper and punitive,” Spiro alleged in the December 27 letter.

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. Picture: Constanza Hevia/AFP

An SEC rule requires investors like Mr Musk to disclose within 10 calendar days when they cross a five per cent ownership threshold.

The SEC said Mr Musk did not disclose his stake until April 4, 2022, 11 days after the deadline, by which time he owned more than nine per cent of Twitter’s shares.

Twitter’s share price rose more than 27 per cent following that disclosure, the SEC said.

Mr Musk eventually purchased Twitter for $44 billion in October 2022, and renamed it X.

Spiro admitted that Mr 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.

Mr Musk has since rebranded Twitter to X. Picture: Kirill Kudryavtsev/AFP

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 September 25 settled charges against 25 entities and individuals for similar violations including Alphabet and Goldman totalling $3.8 million.

However, he did acknowledge that the $263 million penalty would be consistent if there was a fraud component to the case.

Mr 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

This article originally appeared in the New York Post and has been reproduced with permission.