Litigation Releases (Elon R. Musk)

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 26219 / January 14, 2025

Securities and Exchange Commission v. Elon Musk,

No. 1:25-cv-00105 (D.D.C. filed Jan. 14, 2025)

SEC Charges Elon Musk for Violating the Beneficial Ownership Reporting Requirements of the Federal Securities Laws

The Securities and Exchange Commission announced today that it has filed an action against Elon Musk alleging that he failed to timely file a beneficial ownership report with the Commission after acquiring beneficial ownership of more than five percent of the outstanding shares of Twitter, Inc. common stock, in violation of the beneficial ownership reporting requirements under the Securities Exchange Act of 1934 ("Exchange Act"). According to the SEC's complaint, Musk saved at least $150 million at the expense of Twitter shareholders by failing to timely file the beneficial ownership report.

Congress enacted the beneficial ownership reporting requirements to, among other things, help investors make informed investment decisions by providing information about accumulations of certain classes of equity securities by persons who have the potential to change or influence control of the issuer companies.

According to the SEC's complaint, after Musk failed to timely file a beneficial ownership report by March 24, 2022, he purchased more than $500 million worth of Twitter common stock between March 25, 2022 and April 1, 2022. As alleged, because Musk failed to timely file a beneficial ownership report with the SEC, he was able to make these purchases of Twitter common stock at artificially low prices from the unsuspecting public, who had not yet priced in the undisclosed material information of Musk's beneficial ownership of more than five percent of Twitter common stock and investment purpose. According to the SEC's complaint, Musk underpaid by at least $150 million for his purchases of Twitter common stock in this period. The complaint further alleges that, due to Musk's failure to timely file a beneficial ownership report with the SEC, investors that sold Twitter common stock between March 25, 2022 and April 1, 2022 did so at artificially low prices, thereby suffering substantial economic harm.

The SEC's complaint, filed in the U.S. District Court for the District of Columbia, charges Musk with violating Section 13(d) of the Exchange Act and Rule 13d-1 thereunder. Section 13(d) imposes a strict liability standard. The complaint seeks permanent injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.