Elon Musk's X gave a rebuttal to the EU, arguing it was not big enough to face the new bloc's curbs
Elon Musk has been slapped with a lawsuit from the SEC. AFP

KEY POINTS

  • Musk was supposed to publicly disclose his acquired stocks when they crossed 5% but failed to do so
  • The Tesla CEO has since called the SEC a 'totally broken organization'
  • The Wall Street regulator wants Musk to pay disgorgement, as well as a civil penalty

The U.S. Securities and Exchange Commission (SEC) on Tuesday filed a lawsuit against tech billionaire Elon Musk, alleging that the X owner did not disclose his active stake in the social media platform (then Twitter) that allowed him to buy Twitter shares at "artificially low prices."

The financial regulator said Musk's actions were in violation of federal securities laws since his failure to disclose the acquisition of over five percent of Twitter's outstanding common stock in March 2022, which allowed him to "underpay by at least $150 million for shares he purchased."

The SpaceX founder should have filed with the SEC "a beneficial ownership report" to disclose his Twitter holdings within 10 calendar days after he crossed the five percent outstanding common stock acquisition threshold as per securities laws, the lawsuit said.

Musk only supposedly filed the public disclosure on April 4, 2022, 11 days late. At the time, he had already amassed nine percent of the social media platform's outstanding common stock.

The SEC further alleged that on the day Musk revealed his Twitter stock acquisitions, the platform's stock price spiked over 27% from the previous day's closing price.

According to the complaint, the tech mogul directed his personal wealth manager to instruct a broker to begin purchasing Twitter stocks on the Tesla CEO's behalf but make sure the acquisitions don't exceed the five percent threshold.

The wealth manager supposed "cautioned the broker to make the purchases in a way that would minimize any increase in Twitter's stock price that might result from the purchases," since Musk supposedly understood that a substantial spike in the platform's common stock price would also increase his costs in purchasing shares.

To make matters worse, Musk and his wealth manager allegedly did not obtain legal advice in February and March 2022 to determine the businessman's "obligations" under securities laws in relation to his Twitter stock holdings.

The SEC now seeks disgorgement pay over his "unjust enrichment as a result of his violation" of securities laws. The disgorgement pay is separate from the civil penalty the SEC wants to be imposed on the Tesla CEO.

In response to a prominent crypto user's post about the lawsuit, Musk blasted the SEC as a "totally broken organization," criticizing it further for allegedly spending time on "sh** like this when there are so many actual crimes that go unpunished."

Musk's takeover of Twitter was one of the most chaotic in modern history. Thousands were fired, and Musk faced multiple lawsuits over the $44 billion acquisition deal.

Despite the chaos that ensued in the weeks following Musk's acquisition of Twitter, he has since recovered from the backlash from that time and in recent months gained much popularity due to his close ties to Donald Trump.

Musk is less than a week away from becoming an influential person in the White House, given his massive support for the incoming president during the campaign.

Originally published on IBTimes