As time runs out on the Biden administration, the US Securities and Exchange Commission sued Elon Musk in federal court. The existing system is straightforward. The appeal period is very difficult.
The SEC’s complaints focused on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to inform the agency that he received more than 5 percent of the common shares in the company within 10 calendar days. If true, that delay would violate federal security regulations. “As a result, Musk was able to continue to buy shares at low prices,” the SEC said, “allowing him to pay at least $150 million for the shares he bought after his beneficial ownership report.” The SEC requested a hearing.
All of this should be very easy. “It looks like a straight case of a clear violation of well-established SEC law,” said James Park, a professor at the UCLA School of Law who specializes in securities regulation and corporate law. You can submit your documents within 10 days or not; The SEC says Musk didn’t. He received enough shares to cross that threshold on March 14 of that year, the agency alleges, and didn’t disclose his ownership until April 4. (The SEC alleges Musk was 11 days late, as he resumed receiving shares on March 24.)
However, it took almost three years for the SEC to bring the case. “The question is, why are they doing it now,” said David Rosenfeld, former head of the SEC’s legal office in New York and currently a professor at Northern Illinois University College of Law. “The only reasonable answer is that they want to do it before the administration changes.” Rosenfeld notes that he did not review the SEC’s complaint in depth.
That executive shakeup, which took place in less than a week, creates a favorable regulatory environment for Musk, who has donated hundreds of millions of dollars to political committees supporting Donald Trump’s presidential campaign and has reportedly been a close adviser to the president-elect. during the transition. The current SEC chairman, Gary Gensler, is likely to be replaced by Trump’s nominee, Paul Atkins, who is widely seen as supporting a touch of light regulation.
Musk’s attorney, Alex Spiro, says he believes the complaint is divisive. “With the SEC backing down and leaving office, the SEC’s multi-year campaign to harass Mr. Musk culminated in the filing of a single ticky-tack complaint against Mr. Musk,” he wrote in an email.
While the filing comes shortly before Trump’s inauguration on January 20, the investigation that led to the complaint has been years in the making. The agency was required to subpoena Musk in May 2023 for his testimony in the investigation and said Musk withdrew from it two days before testifying in September. A federal court upheld an earlier decision to compel him to testify in May 2024; SEC lawyers flew out to interview him on September 10, but he stopped them again to attend the SpaceX launch.
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