SEC Sues Elon Musk over X Stock Disclosure

The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that he failed to disclose his acquisition of beneficial ownership in Twitter (now X) in early 2022, enabling him to purchase shares at artificially deflated prices.

The lawsuit, filed on January 14th, 2025, in a Washington, D.C. federal court, contends that Musk’s delayed disclosure allowed him to exploit an informational asymmetry in the market.

SEC Lawsuit Details on Elon Musk’s X

The SEC’s complaint centers on Musk’s acquisition of over 5% of Twitter’s outstanding common stock by March 14th, 2022. Regulatory guidelines mandate the disclosure of such holdings within ten days.

Musk, however, allegedly failed to file the required report until April 4th, 2022 – eleven days past the deadline. The SEC asserts that this delay allowed Musk to purchase shares between March 24th and April 4th at prices that did not reflect his substantial ownership stake.

The SEC claims Musk spent over $500 million acquiring Twitter shares during this period, underpaying investors by at least $150 million. The complaint emphasizes that the market price of Twitter stock surged by more than 27% on April 4th, the day Musk finally disclosed his holdings, directly illustrating the alleged artificial deflation of the share price before his disclosure.

Lawsuit Coincidence or Political Revenge

The timing of the lawsuit is notable. It arrives just days before the anticipated change in SEC leadership, with Chair Gary Gensler’s scheduled departure on January 20th, coinciding with Donald Trump’s assumption of the presidency.

The lawsuit’s proximity to this transition adds a layer of political intrigue, particularly considering Musk’s appointment as an advisor to the incoming president on government efficiency.

Musk’s response has been swift and dismissive. In a January 15th post on X, he characterized the SEC as a “totally broken organization,” criticizing its focus on this matter while allegedly ignoring more serious crimes. His lawyer, Alex Spiro, echoed this sentiment, describing the lawsuit as a “single-count ticky tak complaint” stemming from a multi-year campaign of harassment. He asserted that Musk has committed no wrongdoing and that the suit is a “sham.”

Despite these rebuttals, the SEC is pursuing a jury trial and seeking “disgorgement of his unjust enrichment,” along with the imposition of a civil penalty. The lawsuit highlights the critical importance of timely disclosure in maintaining fair and transparent capital markets.