Elon Musk Denies Fraud Allegations in SEC Filing Over Twitter Acquisition

Elon Musk denied fraud allegations in a July 3 SEC filing, asserting no ill intent in his delayed disclosure of acquiring a significant Twitter stake. Former shareholders are suing, alleging missed profits due to his late filing.

Elon Musk Denies Fraud Claims in SEC Filing Amidst Lawsuit from Former Twitter Shareholders

During a late-night filing on July 3, Elon Musk, the owner of Twitter (now X), denied any ill intent in neglecting to notify the Securities and Exchange Commission (SEC) that he had acquired a substantial stake in the social media company before taking it private. As Wccftech reported, a series of unexpected developments characterized Musk's acquisition of Twitter. Initially, the billionaire attempted to halt the transaction, but he ultimately joined a consortium of investors to acquire a multibillion-dollar stake in the company.

Former shareholders are currently suing him, alleging that Musk's delayed disclosure resulted in them missing out on profit-taking as the social media company's shares increased by as much as 27% after his position was disclosed. Musk has requested that the lawsuit be dismissed and has refuted allegations of fraud in his filing.

Musk Denies Fraud Intent, Accused of Misleading Twitter Investors in $2.6 Billion Stake Acquisition

Reuters was the first to report on the specifics of Musk's statement, and he denies any intention to defraud Twitter shareholders by failing to comply with the SEC's regulations regarding his ownership stake in the company. In September of last year, a lawsuit was filed against Musk and his trust. The lawsuit claims that the billionaire "hid and misrepresented his attempt" to influence Twitter's operations by acquiring a substantial stake in the company. It delineates that he initiated the acquisition of Twitter shares in January 2022 and ultimately spent $2.6 billion by early April.

Musk acquired approximately 42 million Twitter shares on March 14, which granted him control over more than 5% of the company. The SEC's laws mandated a ten-day window during which Musk was obligated to disclose his position to inform other Twitter investors that the company may be the target of an activist investor. This triggered the regulatory requirement. The investors contend that the oligarch would purchase additional shares over the subsequent ten days following the expiration of his disclosure period and that the shares would remain stable, resulting in a savings of over $200 million.

Musk Refutes Fraud Claims, Asserts Filing Error in SEC Disclosure of Twitter Stake

On the other hand, Musk refutes these accusations and insists that he did not defraud investors by neglecting to disclose the specifics of his stake. His filing asserts that the plaintiffs' evidence indicates a "mistake" that he promptly rectified upon realizing that he violated Section 13 of the Securities and Exchange Act. Furthermore, the lawsuit claims that Musk disclosed his stake by submitting a 13G form to the SEC, which enabled him to conceal the motivations behind the shares. The investors contend that Musk should have submitted a 13D disclosure instead, as he had intended to exert control over Twitter's operations.

Musk's court filing also refutes the assertion that he collaborated with investment bank Morgan Stanley to acquire Twitter shares in a manner that kept the market from discovering the transaction. The SEC is conducting a distinct fraud investigation into Musk concerning his acquisition of Twitter. In May, he consented to questioning after initially declining to attend the regulator's questioning sessions, alleging that the SEC was harassing him.

Photo: JD Lasica from Pleasanton, CA, US, CC BY 2.0, via Wikimedia Commons