On Thursday, a federal judge tentatively ruled that Elon Musk must testify again in the U.S. Securities and Exchange Commission’s (SEC) investigation into his $44 billion Twitter takeover. This ruling represents a legal victory for the SEC in its ongoing clash with the world’s wealthiest individual.
Background and SEC Lawsuit
The SEC sued Musk in October to compel his testimony regarding the 2022 purchase of social media giant Twitter, which he subsequently rebranded as X. The agency is investigating whether Musk adhered to legal requirements when submitting paperwork about his Twitter stock acquisitions and whether his statements about the deal were potentially misleading.
Judge Beeler’s Verdict
During the hearing in San Francisco, U.S. Magistrate Judge Laurel Beeler swiftly dismissed Musk’s attorney’s arguments challenging the SEC’s authority to issue subpoenas. She emphasized the SEC’s broad investigative powers, stating that no judge would question the agency’s right to conduct a probe. Beeler instructed both parties to schedule another four-hour deposition for Musk or face her issuance of an order.
SEC’s Ongoing Investigation
The SEC investigated Musk’s Twitter takeover in April 2022, following Musk’s disclosure of his stock purchases. Musk cooperated initially, providing documents and testifying via videoconference in July. However, the SEC sought additional testimony in September after receiving new compositions, with which Musk refused to comply.
Musk’s Legal Defense and Past Feuds
In response to the SEC’s lawsuit, Musk’s legal team argued against the SEC’s request, labeling the investigation as misguided and accusing the SEC of harassment. The lawyers also contended that enforcement staff lacked lawfully appointed authority to issue subpoenas. Judge Beeler expressed inclination towards the SEC’s position but reserved a closer examination before issuing her order.
This legal skirmish is the latest episode in a long-standing feud between Musk and the SEC, dating back to 2018 when Musk’s “funding secured” tweet led to an SEC investigation. Despite settling that case, Musk faced another SEC lawsuit in 2019, alleging a breach of the settlement. The SEC has conducted multiple probes into Musk and Tesla over the years.
Musk’s Twitter Takeover Timeline
Elon Musk’s acquisition of a 9.2% stake in Twitter was disclosed on April 4, 2022, 11 days after the SEC’s disclosure deadline. Initially, Musk indicated passive ownership intentions, only to announce plans to purchase Twitter for $44 billion. Musk attempted to back out of the deal, alleging incomplete disclosure by Twitter regarding bot activity on its platform. The acquisition was completed in late October 2022 after legal challenges.
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