SEC sues Elon Musk over alleged security violations

The Securities and Exchange Commission (SEC) of the administration of the United States President, Joe Biden, has filed an enforcement action against world’s richest man, Elon Musk, over alleged securities violations.

This development is taking place just days before Donald Trump, a close friend of Elon Musk is set to become President.

SEC made the announcement in the litigation release on January 14, 2025.

It said that the agency filed an enforcement action against Musk over his purchase of X, formerly known as Twitter.

Musk, it could be recalled, is the co-chair of the Department of Government Efficiency and the current owner of X.

He had purchased X from Jack Patrick Dorsey in 2021.

Dorsey, an American programmer and businessperson, was who is a co-founder and former CEO of Twitter, Inc. from 2015 until 2021.

The SEC lawsuit

In the lawsuit against Musk, SEC alleged that he committed securities fraud.

It attributed the fraud to failing to disclose his ownership of Twitter (now known as X) in a timely manner.

According to the SEC, Musk didn’t report his stake in the company until he owned more than 9% of the shares.

This, it said, allowed him to buy additional shares at “artificially low prices”, costing Twitter investors over $150 million.

Musk’s lawyer, Alex Spiro, responded, calling the lawsuit a “sham”, stating that Musk did nothing wrong.

This case is one of the last actions by SEC Chair Gary Gensler before the Trump administration takes over.

It remains to be seen how it will proceed under the new administration to be headed by Musk’s ally, Donald Trump.

The SEC controversy

The SEC stated that Musk acquired more than 5% of Twitter’s outstanding common stock in early 2022.

It noted, however, that he (Musk) didn’t report it until 11 days later, which is a violation of federal regulations.

The regulations require notification within 10 days of surpassing the 5% threshold.

The SEC claimed that Musk’s delay in reporting allowed him to acquire additional shares at artificially low prices.

This it noted, resulted in significant economic harm to other Twitter investors.

The lawsuit seeks to have Musk pay a civil penalty and return profits the SEC claims he reaped unjustly from his stock purchases.

Musk’s lawyer said the suit is a “a campaign of harassment” against his client, who had been at crossroads with the Biden administration.

The fallout followed his involvement and support of Trump over the Democratic Party’s presidential candidate and Biden’s vice, Kamala Harris.

Spiro also stated that the SEC’s proposed penalty is “inherently improper and punitive”.

Twitter’s worth

As of October 28, 2022, Twitter was delisted from the New York Stock Exchange after being acquired by Elon Musk.

At that time, its market capitalization was around $41.09 billion.

Before its delisting, Twitter’s stock price had fluctuated over the years.

It reached an all-time high of $80.75 in February 2021 and a low of $13.73 in May 2016.

In the meantime, Musk had purchased Twitter for approximately $44 billion, which gives an idea of the company’s valuation at the time of acquisition.

However, the current worth of Twitter is not publicly disclosed since it’s no longer a publicly traded company.

About Elon Musk

Elon Musk is a business magnate and entrepreneur and one of the most influential and successful entrepreneurs of our time.

He is known for his ambitious goals in revolutionizing transportation, energy, and space exploration.

As of January 2025, Forbes estimates his net worth to be a staggering $421 billion, making him the wealthiest individual in the world.

Musk’s business ventures include:

SpaceX

SpaceX is space exploration company founded in 2002.

It has as its goal the reduction of space transportation costs and enabling the colonization of Mars.

Tesla

Tesla is an electric vehicle and clean energy company founded in 2003, which has become one of the leading players in the electric vehicle market.

Neuralink

Neuralink, a neurotechnology company founded in 2016, aims to integrate the human brain with computers.

The Boring Company

The Boring Company is a tunnel construction company founded in 2016, which aims to reduce traffic congestion in cities by building underground tunnels.

X Corp.

X Corp, a holding company founded in 2022, owns and operates Twitter, as well as other companies.

Musk has been known for his innovative ideas, vision, and leadership style, but has also faced criticism and controversy over the years.

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