With time running out for the Biden administration, the U.S. Securities and Exchange Commission has taken Elon Musk to federal court. The present statute is relatively simple. The timing of the complaint is more complicated.
The SEC's complaint centers on Musk's acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to notify the agency that he had acquired more than 5 percent of the company's common stock within 10 calendar days. If true, that delay would violate federal security laws. “As a result, Musk was able to continue purchasing shares at artificially low prices,” the SEC alleges, “underpaying at least $150 million for the shares he purchased after his beneficial ownership report was due. ” The SEC has requested a jury trial.
This should all be quite simple. “It seems like a simple case about a clear violation of an established SEC rule,” said James Park, a professor at the UCLA School of Law who focuses on securities regulation and corporate law. Either submit your paperwork within 10 days or don't; the SEC claims Musk didn't. He acquired enough shares to cross that threshold on March 14 of that year, the agency alleges, and did not publicly disclose his ownership until April 4. (The SEC claims that Musk was technically eleven days late, because he continued acquiring shares through March 24.)
And yet it took almost three years for the SEC to file a case. “The question is, why are they doing it now,” said David Rosenfeld, former co-head of the SEC's enforcement bureau in New York and currently a professor at Northern Illinois University College of Law. “The only plausible answer is that they want to get it done before the government changes.” Rosenfeld notes that he did not investigate the SEC complaint in depth.
That executive branch switch, coming 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 in support of Donald Trump's presidential campaign and is reportedly a close adviser to the president-elect has been. during the transition period. The SEC's current chairman, Gary Gensler, will likely be replaced by Trump's nominee, Paul Atkins, who is widely seen as a proponent of lighter regulation.
Musk's attorney, Alex Spiro, says he believes the complaint is a parting shot. “As the SEC withdraws and leaves office, the SEC's multi-year campaign of harassment against Mr. Musk culminated in the filing of a single complaint against Mr. Musk,” he wrote in an email.
Although the filing comes just before Trump's inauguration on January 20, the investigation that led to this complaint has been years in the making. The agency had to subpoena Musk in May 2023 to get his testimony into the investigation, saying Musk canceled the deposition 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 flew out to interview him on September 10, but he stood them up again to attend a SpaceX launch.
