Current US President Joe Biden is scheduled to hand over power to President-elect Donald Trump in just a few days. Interestingly, the Securities and Exchange Commission has decided to file a lawsuit against Elon Musk over his 2022 acquisition of Twitter (which is now known as X), alleging he played fast and loose with disclosure rules to save at least $150 million.
The case centers on a crucial 11-day period in early 2022 when Musk was quietly amassing Twitter shares. According to the SEC, once Musk’s ownership exceeded 5% of Twitter’s shares in March 2022, he was required by law to disclose his position. Instead, he kept buying in silence until April 4, allegedly allowing him to scoop up additional shares at artificially low prices.
At any other point in time, the SEC lawsuit would probably not have raised eyebrows. But now, it happens to come as SEC Chair Gary Gensler prepares to step down on January 20, making this one of the regulator’s final acts under current leadership.
To add to the drama, sources indicate Elon Musk has become a close adviser to the incoming administration, even taking up residence at Mar-a-Lago and co-chairing a federal budget task force.
Musk’s legal team isn’t taking this challenge lying down. His attorney, Alex Spiro, dismissed the lawsuit as a “sham” and the culmination of what he called a “multi-year campaign of harassment” against his client. Spiro argues that even if proven, the alleged administrative failure would carry only a nominal penalty.
This isn’t Musk’s first tango with the SEC. The lawsuit happens to be their third courtroom confrontation, following previous battles over market-moving social media posts about Tesla. The billionaire has shown his characteristic defiance throughout the investigation, even taunting the agency on X after a federal judge denied their request for sanctions.
The question now hanging over Wall Street is whether this case will survive the upcoming administration change. With new leadership expected at the SEC and Musk’s growing influence in political circles, the fate of this eleventh-hour lawsuit remains uncertain (but we can probably take an educated guess).
Lately, there has been a call for oversight of high-profile investors and the enforcement of securities laws in an era when billionaires can move markets with a single social media post. As one expert put it, the SEC is trying to send a message that “billionaires who engage in litigation warfare are going to comply with the law like every other American.”
Whether that message will stick, however, may depend more on politics than law in the coming months.
