The SEC is suing Elon Musk for allegedly not disclosing the Twitter acquisition on time

The Securities and Exchange Commission filed a lawsuit against Elon Musk on Tuesday for an alleged securities violation related to his acquisition of Twitter, now called X.

The SEC claims that Musk failed to disclose his 5% stake in Twitter in a timely manner, violating federal securities law, according to a complaint filed in federal court in Washington, DC. The SEC says Musk waited to disclose the acquisition to build a larger position in Twitter at a discount.

This lawsuit comes during Gary Gensler’s last week as chairman of the SEC, before he resigns on January 20. Gensler and Musk have had a few spats over the past four years, including just last month when Musk scoffed at a settlement offer from the SEC’s office on X. However, Musk could face a friendlier SEC commissioner in a few weeks when Trump’s nominee takes office.

The SEC complaint says Musk disclosed his Twitter acquisition 11 days late. After acquiring more than 5% of Twitter – which Musk assumed to be done on March 24, 2022 – he was asked by the SEC to submit a beneficial ownership report. It filed the report on April 4, 2022, according to the SEC filing.

During this delayed disclosure period, Musk allegedly increased his position in Twitter from a 5% stake to a 9% stake. On the day Musk disclosed his acquisition with the SEC, Twitter’s stock price rose 27% over the previous day’s closing price. The SEC claims this allowed Musk to pay more than $150 million for his stake in Twitter.

In its complaint, the SEC proposed that Musk must return the profits that he has unfairly harvested, and pay an additional civil penalty. Ultimately, a federal court will decide whether the SEC’s allegations have merit, and determine whether Musk should be fined.

Musk’s lawyer, Alex Spiro, called this complaint an “admission” that the SEC cannot bring a “current case,” in a statement to Bloomberg on tuesday

“As the SEC retires and leaves office, the SEC’s multi-year campaign of harassment against Mr. Musk has culminated in the filing of a ticky tak complaint against Mr. Musk,” Spiro told Bloomberg .

In a December post on X, Musk shared a letter from Spiro that struck a chord similar notes, also refer to “years of harassment” by the SEC. That letter rejected a settlement offer from the SEC around this case.

To fill Gensler’s role, President-elect Donald Trump appointed Paul Atkinswho served as SEC Commissioner during the Bush administration and is expected to be friendlier to Trump’s allies. These days, Musk is as close to Trump as anyone, and the owner of X could face a different regulatory regime in just a few weeks.