The U.S Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that the billionaire failed to properly disclose his ownership stake in Twitter, now known as X, in early 2022. According to the regulator, this lack of disclosure reportedly enabled him to acquire shares at artificially low prices, resulting in significant financial advantages.

As expected, this news became mainstream quickly following a litigation release by the SEC detailing the reasons for the lawsuit. Even more so, there's been different reactions on social media platforms criticizing SEC’s move. 

According to the SEC's complaint, filed on January 14 in a federal court in Washington, D.C., Musk's delayed reporting allowed him to continue purchasing shares at reduced rates, ultimately costing Twitter investors over $150 million. 

The SEC claims that Musk was required to disclose his ownership after surpassing the 5% threshold of Twitter's outstanding shares by March 14, 2022. However, he did not file the necessary report until April 4, 2022—11 days past the deadline.

Related news: Musk Withdraws His Lawsuit Against OpenAI CEO Sam Altman

On the day Musk finally disclosed his beneficial ownership, Twitter's stock price surged more than 27% compared to its previous closing price. The SEC argues that had investors been informed of Musk's stake sooner, they would have adjusted their selling prices accordingly, preventing Musk from benefiting at their expense.

The lawsuit comes at a pivotal moment as the SEC prepares for a leadership change; Chair Gary Gensler is set to step down on January 20 as Donald Trump assumes office. Musk is expected to advise the incoming administration on government efficiency.

For added context, it's important to know that Musk began acquiring Twitter shares in early 2022 and had amassed a significant stake by mid-March. 

During this period, the SEC had already alleged that he spent over $500 million on shares while underpaying other investors due to his failure to disclose material information. The complaint highlights that Musk's actions allowed him to purchase shares from unsuspecting investors at prices that did not reflect his undisclosed ownership status.

In response to the lawsuit, Musk took to X on January 15, branding the SEC a "totally broken organization." He criticized the agency for focusing on what he described as trivial matters while serious crimes go unpunished. 

His attorney, Alex Spiro, characterized the SEC's actions as an ongoing campaign of harassment against Musk and claimed that the lawsuit reflects the agency's inability to build a substantive case against him.

Musk's acquisition of Twitter for $44 billion was finalized on April 25, 2022. Following this purchase, he took the platform private and rebranded it as X. His tenure has seen significant changes, including layoffs of top executives and half of the workforce, as well as alterations to content moderation policies that have drawn scrutiny from regulators worldwide.

The SEC is seeking a jury trial and demands that Musk pay for "disgorgement of his unjust enrichment" along with a civil penalty. This legal action underscores ongoing tensions between Musk and regulatory bodies following previous encounters with the SEC regarding his public statements about Tesla and other ventures.

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