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With the clock running out on the Biden administration, the Securities and Exchange Commission of the United States sued Elon Musk in federal court. The status at hand is relatively simple. The timing of the complaint is more complicated.
The SEC’s complaint centers on Musk’s purchase of Twitter shares in early 2022. According to the complaint, Musk failed to notify the agency that he had acquired more than 5 percent of the shares common in the company in 10 calendar days. If true, that delay would violate federal security laws. “As a result, Musk was able to continue to buy shares at artificially low prices,” the SEC said attach“allowing it to pay underwriters of at least $150 million for the shares it acquired after its beneficial ownership report was due.” The SEC requested a jury trial.
This should all be pretty simple. “It looks like a clear case of a clear violation of a well-established SEC rule,” says James Park, a professor at the UCLA School of Law who focuses on securities regulation and corporate law. Either do your paperwork in 10 days or don’t do it; the SEC claims that Musk has not. He bought enough shares to cross that limit by March 14 of that year, the agency says, and didn’t publicly disclose his ownership until April 4. March 24.)
Yet it took almost three years for the SEC to bring a case. “The question is, why are they doing it now,” says David Rosenfeld, former co-head of the New York SEC’s enforcement office and currently a professor at Northern Illinois University College of Law. “The only plausible answer is that they want to do it before the administration changes.” Rosenfeld notes that he did not review the SEC complaint in depth.
That executive branch change, which happens in less than a week, creates a more favorable regulatory environment for Musk, who he donated hundreds of millions of dollars to political action committees supporting Donald Trump’s presidential campaign and has been a close advisor to the president-elect during the transition period. The current SEC chairman, Gary Gensler, will likely be replaced by Trump’s nominee, Paul Atkins, who is widely seen as supporting a touch lighter regulators.
Musk’s attorney, Alex Spiro, says he believes the lawsuit is a parting shot. “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 single tick-tack complaint against Mr. Musk,” he wrote in an email.
While the deposition comes just before Trump’s inauguration on January 20, the investigation that led to this complaint has been years in the making. The agency subpoenaed Musk in May 2023 to testify in the investigation and he said that Musk canceled on them two days before his scheduled testimony in September. A federal court sustained a previous decision to compel him to testify in May 2024; SEC lawyers flew in to interview him on September 10, but he he stood up once to attend a SpaceX launch.
