In a recent courtroom showdown, a federal judge provisionally decreed that Elon Musk, the magnate behind Tesla and SpaceX, must undergo further questioning by the U.S. Securities and Exchange Commission (SEC) regarding his high-profile $44 billion Twitter acquisition. The decision marks a triumph for the SEC in its ongoing legal tussle with the world’s wealthiest individual.
U.S. Magistrate Judge Laurel Beeler swiftly dismissed Musk’s legal team’s assertions challenging the SEC’s subpoena authority during the San Francisco hearing. Beeler emphasized the SEC’s expansive investigative powers, asserting that judicial interference in the SEC’s probe would be unwarranted.
The judge directed both parties to schedule an additional four-hour deposition for Musk or face a court-ordered session in San Francisco come February if no consensus is reached. The SEC initiated legal action against Musk in October, compelling him to testify about his 2022 purchase of Twitter, rebranded as X. Musk had previously declined a September interview for the SEC’s investigation.
The SEC is scrutinizing whether Musk adhered to legal requirements when filing paperwork related to his Twitter stock purchases and whether his public statements regarding the transaction were misleading. This latest clash between Musk and the SEC stems from their longstanding conflict, beginning in 2018 when Musk tweeted about securing funding to take Tesla private.
The SEC has been investigating Musk’s Twitter takeover since April 2022, initially triggered by Musk’s public disclosure of his stock acquisition. Despite Musk providing documents and participating in videoconference sessions in July, the SEC sought additional testimony in September, which Musk resisted.
In response to the SEC’s lawsuit, Musk’s legal team accused the SEC of harassment, urging the court to reject the SEC’s request. Musk’s lawyers also contended that enforcement staff lacked the lawful authority to issue subpoenas. While the judge expressed inclination toward the SEC’s perspective, she pledged to further examine the matter before issuing a formal order.
Acknowledging the challenges of prolonged investigations, the judge sided decisively with the SEC, anticipating that one more deposition day would conclude the matter. Musk and the SEC have a history of legal clashes, with the infamous “funding secured” tweet in 2018 leading to a settlement. Despite subsequent lawsuits and probes, Musk emerged victorious in a shareholder lawsuit in February.
Musk’s disclosure of a 9.2% Twitter stake in April 2022, after missing the SEC’s deadline, preceded the subsequent $44 billion takeover announcement. Musk, initially presenting as a passive stakeholder, later accused Twitter of inadequate disclosure, attempting to back out of the deal. After legal challenges, Musk finalized the acquisition in October 2022.
Reporting by Chris Prentice and Jody Godoy in New York; Additional reporting by Hyunjoo Jin in San Francisco; Editing by Michelle Price and David Gregorio. The Thomson Reuters Trust Principles.
