With time running out on the Biden administration, the US Securities and Exchange Commission filed suit Elon Musk in federal court. The statute at hand is relatively simple. The timing of the complaint is more complicated.
The SEC’s complaint focuses on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to notify the agency that he had acquired more than 5 percent of the company’s common stock within 10 calendar days. If true, that delay would violate federal safety laws. “As a result, Musk was able to continue buying shares at artificially low prices,” SEC states“allowing him to pay less than at least $150 million for the stock he bought after his beneficial ownership report was required to be filed.” The SEC requested a jury trial.
This should all be pretty simple. “It looks like a clear case of a clear violation of a well-established SEC rule,” said James Park, a professor at UCLA Law School who focuses on securities regulation and corporate law. You submit your documentation within 10 days or not; The SEC claims that Musk did not. He acquired enough shares to cross that threshold by March 14 of that year, the agency claims, and did not publicly disclose his holdings until April 4. (The SEC claims that Musk was technically 11 days late, because he continued to acquire shares through March 24.)
Still, it took nearly three years for the SEC to file a case. “The question is why are they doing it now,” says David Rosenfeld, former co-head of the SEC’s New York office of enforcement and currently a professor at Northern Illinois University School of Law. “The only plausible answer is that they want to get it done before the administration changes.” Rosenfeld notes that he has not reviewed the SEC’s complaint in detail.
That executive shakeup, which takes place in less than a week, creates a more favorable regulatory environment for Musk, who donated hundreds of millions of dollars political action committees supporting Donald Trump’s presidential campaign and has reportedly been a close adviser to the president-elect during the transition period. Current SEC Chairman Gary Gensler is likely to be replaced by Trump’s nominee, Paul Atkins, who is widely seen as a supporter easier regulatory touch.
Musk’s lawyer, Alex Spiro, says he believes the appeal is a farewell opportunity. “As the SEC retires and leaves office, the SEC’s multi-year campaign of harassment against Mr. Musk has culminated in the filing of a one-off lawsuit against Mr. Musk,” he wrote in an email.
Although the complaint came shortly before Trump’s January 20 inauguration, the investigation that led to this complaint took years. The agency had to subpoena Musk in May 2023 to get his testimony in the investigation and he said that Musk canceled on them two days before the scheduled testimony that September. Federal court supported an earlier decision to compel him to testify in May 2024; SEC lawyers flew out with him for an interview on September 10, but he straightened them up attend the SpaceX launch again.