U.S. securities regulators sued Elon Musk in federal court in Washington on Tuesday in an enforcement action stemming from his $44 billion purchase of Twitter, now called X.
The lawsuit against Mr. Musk, who became a close adviser to President-elect Donald J. Trump, will likely be one of the Securities and Exchange Commission’s most controversial final acts under Gary Gensler, its outgoing chairman. It could also be compromised in just a few days, when Mr. Trump appoints new leaders to take charge of the regulator.
The SEC claims that by purchasing Twitter in 2022, Mr. Musk violated securities laws by building a large stock position in the social media company without filing the appropriate notification. The complaint said he waited 11 days before filing the required disclosure with the SEC.
Regulatory filings are necessary so that investors in the market can monitor the movements of large investors and potential tender offers.
Because Mr. 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. That decision “allowed him to underpay by at least $150 million” for the additional shares before belatedly disclosing his stake, the lawsuit continues.
In recent weeks, Mr. Musk had taunted the SEC in articles on X about the possibility of taking legal action. In December, he shared a letter his lawyer, Alex Spiro, sent to the agency, rejecting a settlement offer in the case.
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