SEC sues Elon Musk over Twitter-related securities violations

Elon Musk attends a gala at President-elect Donald Trump’s residence and private club Mar-a-Lago, in Palm Beach, Fla., Nov. 14, 2024. The U.S. Securities and Exchange Commission (SEC) sued Musk in federal court in Washington on Tuesday, Jan. 14, 2025, in an enforcement action arising from his $44 billion purchase of Twitter, now called X. (Haiyun Jiang/The New York Times)

By Matthew Goldstein and Kate Conger

U.S. securities regulators sued Elon Musk in federal court in Washington earlier this week in an enforcement action arising from his $44 billion purchase of Twitter, now called X.

The lawsuit against Musk, who has become a close adviser to President-elect Donald Trump, is likely to be one of the more contentious final acts of the Securities and Exchange Commission under Gary Gensler, its departing chair. It could also be undercut in just a few days, when Trump appoints new leadership to take charge of the regulator.

The SEC contends that in buying Twitter in 2022, Musk violated securities laws by amassing a large stock position in the social media company without filing the proper notification. The complaint said he had waited 11 days before filing the required disclosure with the SEC.

The regulatory filings are required so investors in the marketplace can monitor the moves of large investors and potential takeover bids.

Because Musk did not disclose his position, he was able to continue buying Twitter stock at an artificially low price, the SEC said in its lawsuit. The move “allowed him to underpay by at least $150 million” for the additional shares before he belatedly disclosed his stake, the lawsuit continued.

Over the past few weeks, Musk had taunted the SEC in posts on X about the potential for filing a lawsuit. In December, he shared a letter that his lawyer, Alex Spiro, had sent to the agency, rejecting a settlement offer in the case.

On Tuesday, Spiro denounced the SEC’s latest filing.

“Today’s action is an admission by the SEC that they cannot bring an actual case, because Mr. Musk has done nothing wrong and everyone sees this sham for what it is,” Spiro said in a statement. The agency had waged a “multiyear campaign of harassment” against Musk but filed “a single-count ticky-tack complaint,” Spiro added.

This is the third time the SEC has gone to court with Musk. The first lawsuit, during Trump’s first term in office, arose from inappropriate market-moving posts on social media in which Musk mused about taking his electric car company, Tesla, private.

Before filing the lawsuit Tuesday, the SEC had also sought to force Musk to comply with a subpoena seeking to take his deposition.

With Gensler stepping down with the inauguration of Trump on Monday, it is unclear whether incoming regulators will pursue the litigation. Trump has said he intends to nominate Paul Atkins, a former SEC commissioner and pro-business conservative, to succeed Gensler.

Daniel Richman, a professor at Columbia Law School who specializes in criminal law, said the lawsuit appeared to be part of a pattern of matters being filed by Biden administration appointees “on their way out.”

It will be up to the new administration and Trump’s appointees to decide whether to “back off and withdraw” cases like the one against Musk, he said.

The SEC and the Consumer Financial Protection Bureau have filed a flurry of lawsuits in the waning days of the Biden administration. As with the case against Musk, it is unclear how these last-minute actions will fare under the new administration.

Regulators filed the lawsuit Tuesday after the close of business on the East Coast without the usual fanfare associated with a big case. The news release announcing the filing did not include a quote from Gensler or any other top official with the agency — a rarity for an action against a high-profile businessperson.

It was an indication that regulators might be worried about the optics of going after the richest person on the planet, who is also a close adviser to the president-elect, less than a week before Inauguration Day.

Musk has been by Trump’s side almost every day since the presidential election. He is living all but full time at Trump’s Mar-a-Lago residence and club in Florida and attending meetings and events with the president-elect.

Trump also appointed Musk as co-chair of a governmental task force that aims to come up with ways to cut the federal budget.

The SEC has pursued its current investigation of Musk for years, beginning shortly after he announced in April 2022 that he had amassed a controlling stake in Twitter.

Musk started buying up Twitter stock in late January 2022. In February, the broker managing his share purchases warned the billionaire’s financial manager that Musk should seek legal advice about disclosing his position, according to the regulator’s lawsuit. In mid-March, Musk passed the 5% ownership threshold, the point when a public disclosure is required.

He continued buying shares in Twitter and did not disclose his stake until April 4, the SEC said in its complaint. After he announced his position, Twitter’s stock shot up more than 27%.

Although Musk initially said in an SEC disclosure that he planned to be a passive shareholder in Twitter, he quickly pivoted and made an offer to buy it outright for $44 billion. In July 2022, he tried to back out of the purchase, but the company sued to force the deal through. Musk completed his purchase that October and later changed the company’s name to X.

The SEC has battled Musk to compel his testimony in the case. In October 2023, the agency sued him in an effort to force him to testify about his share purchases. Musk appeared for testimony a year later. The billionaire also agreed to pay almost $3,000 to compensate the SEC for travel costs it incurred in sending its employees to take his testimony.

But in November, a federal judge in San Francisco denied the SEC’s request to impose sanctions on Musk. The next day, in a post on X, Musk taunted the agency with a crude joke.

Musk’s takeover of Twitter has been the subject of several lawsuits and investigations by federal authorities. The Federal Trade Commission investigated whether X had the resources to protect users’ privacy after he laid off much of its staff and after several senior executives responsible for privacy and security resigned.

That agency has also sought to depose Musk. Former Twitter shareholders have also sued Musk, accusing him of fraud in a case related to his belated disclosure of his stake in the company.