Donald Trump’s inauguration is right around the corner, and his right-hand man Elon Musk is in hot water with the authorities.
The US Securities and Exchange Commission (SEC) has announced that it’s taking Musk to court over his acquisition of Twitter stock in early 2022.
The SEC claims that Musk did not properly notify the commission of his purchasing of more than 5% of common shares in the company and that he bought these at a low price, due to the turbulence ahead of his purchase.
Timing Is Everything
Timing is playing a central role in this legal unfolding in two key ways. Firstly, the SEC has opted to launch this legal bid in the last few days of the Biden administration.
Would this legal bid be trickier under the next president? Trump and Musk are now self-professed pals, and Musk has been given a role in Trump’s government as co-leader of his government efficiency commission.
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Secondly, the timing of Musk’s notification of the purchase of the shares is under scrutiny by the SEC. The SEC argues that Musk did not give them notice of his purchase within the stipulated window.
“As a result, Musk was able to continue purchasing shares at artificially low prices, allowing him to underpay by at least $150 million for shares he purchased after his beneficial ownership report was due.” – SEC filing
What Will Happen Next?
The SEC alleges that Musk’s actions are a violation of federal security laws and, as such, warrant a lawsuit before a jury. Specifically, Musk bought enough shares to cross a threshold, and carried on buying shares until March 24. This means that he was 11 days late in disclosing the purchases.
However, the big question is whether the case will ever get to court. The current head of the SEC, Gary Gensler, is already in Trump’s crosshairs because of the hardline he takes towards regulation.
Trump is expected to give the role to Paul Atkins, who believes in less regulation – something the Trump-supporting tech bros are obviously keen on.
How Has Musk Responded?
There’s nothing from Musk as yet on X, which is uncharacteristic. However, his lawyer, Alex Spiro, says that the move is politically motivated and even termed it “harassment.”
However, the case comes after years of investigation, including a subpoena and an occasion when the tech billionaire decided not to turn up to a meeting with lawyers as he wanted to go to a SpaceX launch. This means Musk had a part to play in the delays in bringing this case to court. Now it is understandable that the SEC is trying to wrap up its work before the administration changes.
Whoever steps in to the top job at the SEC will find it difficult to push aside what looks like a straight forward violation of SEC rules, though they may have some sway over what punishment Musk faces. There remains the question of whether Musk would even accept a settlement if it was offered or if he would insist of fighting any SEC ruling.
