With time running out for the Biden administration, the U.S. Securities and Exchange Commission has sued Elon Musk in federal court. The law in question is relatively simple. The timing of filing the complaint is more complicated.
The SEC’s complaint focuses on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to inform the agency that he had acquired more than 5% of the company’s common stock within a period of time. of 10 calendar days. If true, the delay would violate federal security laws. “As a result, Musk was able to continue purchasing shares at artificially low prices,” the SEC alleges, “which allowed him to underpay by at least $150 million for the shares he purchased after the due date of its beneficial ownership report. The SEC requested a jury trial.
This should all be pretty simple. “This seems like a simple case about a blatant violation of a well-established SEC rule,” says James Park, a professor at UCLA Law School who focuses on securities regulation and corporate law . Either you file your documents within 10 days or you don’t; the SEC says Musk didn’t do it. He acquired enough shares to cross that threshold on March 14 of that year, the agency claims, and did not publicly disclose his ownership until April 4. (The SEC alleges that Musk was technically 11 days late, because he continued to acquire shares through March 24.)
And yet it took the SEC almost three years to file a lawsuit. “The question is why are they doing it now,” says David Rosenfeld, former co-director of the SEC’s enforcement office in New York and currently a professor at Northern Illinois University Law School. “The only plausible answer is that they want this done before the administration changes. » Rosenfeld notes that he has not reviewed the SEC’s complaint in depth.
This executive branch shift, which takes place in less than a week, creates a more favorable regulatory environment for Musk, who has donated hundreds of millions of dollars to political action committees supporting Donald Trump’s presidential campaign and who would have been a close advisor to the president-elect. during the transition period. Current SEC Chairman Gary Gensler will likely be replaced by Trump nominee Paul Atkins, who is widely seen as favoring lighter regulation.
Musk’s lawyer, Alex Spiro, believes the complaint is a final shot. “As the SEC withdraws and leaves office, the SEC’s years-long campaign of harassment against Mr. Musk has culminated in the filing of a single complaint against Mr. Musk,” he wrote in an e -mail.
Although the filing comes just before Trump’s inauguration on January 20, the investigation that led to the complaint took years. The agency had to subpoena Musk in May 2023 for his testimony in the investigation and said Musk canceled them two days before his scheduled testimony in September. A federal court upheld an earlier decision to compel him to testify in May 2024; SEC lawyers came to question him on September 10, but he again stood them up to attend a SpaceX launch.
