A federal judge has rejected Elon Musk's attempt to throw out a US Securities and Exchange Commission lawsuit alleging he waited too long to disclose his growing stake in Twitter. According to reports from Reuters, US District Judge Sparkle Sooknanan wrote in a 45-page decision on Tuesday in Washington, D.C. that "Musk's arguments, including that the SEC overreached in order to punish him for criticizing it, did not warrant dismissal." The judge rejected Musk's arguments that the SEC case constituted selective enforcement and was an affront to his constitutional free-speech rights, including his claim that the SEC overreached to punish him for criticizing the agency.
The SEC's allegations have been updated to show Musk's 11-day delay in revealing his initial 5% Twitter stake in late March and early April 2022 allowed him to purchase more than $500 million worth of shares at artificially low prices. As reported by Reuters, the SEC wants Musk to repay the $150 million he allegedly saved at the expense of unsuspecting investors, plus a civil fine. Musk has called the delay inadvertent and called the $150 million payout an excessive fine that violates the Constitution's Eighth Amendment, noting it dwarfs the $100,000 penalty the SEC has sought in similar cases.
Musk's attorneys in August sought to dismiss the suit, calling it a "waste of this court's time and taxpayer resources," according to Reuters. The SEC responded by urging Sooknanan to find Musk liable without a trial, stating there is "absolutely no dispute" that he missed the disclosure deadline. Judge Sooknanan noted that "the court does not doubt that Mr. Musk would prefer to avoid having to disclose information that might raise stock prices while he makes a play for corporate control," but emphasized that the balance Congress struck in Section 13(d) does not violate the First Amendment. Musk also called the 10-day disclosure requirement "selective enforcement" designed to target him for criticism of "government overreach" that is protected speech under the Constitution's First Amendment.
The SEC requires shareholders to disclose within 10 calendar days when they reach 5% ownership to protect investors who might otherwise be kept in the dark and sell their own stock. As reported by Reuters, Judge Sooknanan explained that this requirement reflects Congress's intent to stop investors from buying shares cheaply while pursuing company control. The case is Securities and Exchange Commission v. Musk, 25-cv-00105, in the US District Court, District of Columbia (Washington). This represents a significant legal challenge to Musk's acquisition strategy and disclosure practices during his takeover of Twitter, highlighting the regulatory scrutiny surrounding major corporate acquisitions and disclosure requirements.
Despite the legal challenges, Musk's wealth continues to grow significantly. As reported by Reuters, Musk is worth $851.6 billion according to Forbes magazine, more than triple the $277.5 billion fortune of Google co-founder Larry Page, who ranks second. On Monday, Musk announced that his rocket and satellite maker SpaceX acquired his artificial intelligence company xAI, whose assets include X. The merger created the world's most valuable private company, worth about $1.25 trillion. Musk has long feuded with the SEC, having previously settled a 2018 case involving Tesla by paying a $20 million civil fine and giving up his role as Tesla's chairman.