Elon Musk Faces Potential Sanctions as SEC Investigates Twitter Purchase

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Ruholamin Haqshanas

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Ruholamin Haqshanas

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Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...

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September 20, 2024

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Elon Musk is under scrutiny as the U.S. Securities and Exchange Commission (SEC) moves to impose sanctions following his failure to attend a court-ordered deposition related to his $44 billion acquisition of Twitter.

The regulatory body announced on Friday its intention to seek sanctions against Musk after he canceled his scheduled testimony just three hours before it was set to take place on September 10, Reuters reported.

The SEC’s filing in a San Francisco federal court stated that it would request an order demanding Musk explain why he should not be held in civil contempt for failing to appear.

Musk’s Last-Minute Decision to Skip Violates Court Order

The agency argues that Musk’s last-minute decision to skip the deposition was in violation of a May 31 court order compelling his testimony.

On the day of the missed testimony, Musk, who leads Tesla and SpaceX, was at Florida’s Cape Canaveral to oversee the launch of SpaceX’s Polaris Dawn mission.

Despite his role as SpaceX’s chief technical officer, the SEC maintains that Musk would have been aware of the planned launch well in advance, given the company’s internal discussions two days prior.

The regulator’s lawyer, Robin Andrews, accused Musk of engaging in “gamesmanship” and urged the court to put a stop to such tactics.

“Musk’s excuse itself smacks of gamesmanship,” Andrews wrote in the filing. “The court must make clear that Musk’s delay tactics must cease.”

Alex Spiro, Musk’s attorney, labeled the SEC’s move as “drastic” and unnecessary.

He argued that Musk’s presence was crucial for the safety of the astronauts involved in the mission and that the testimony has already been rescheduled for October 3.

Spiro contended that the failure to testify was due to an “emergency” and there is no indication it would happen again.

The SEC has refrained from commenting further on the case but noted in its filing that nothing guarantees Musk will appear for the rescheduled testimony on October 3.

SEC Investigates Musk

The investigation centers on whether Musk violated securities laws by not disclosing his initial accumulation of Twitter stock in early 2022 in a timely manner.

According to securities regulations, investors must disclose once they own 5% of a public company.

Musk delayed revealing his 9.2% stake in Twitter, leading to accusations of misleading shareholders.

He has since argued that the delay was a misunderstanding of the disclosure requirements, calling it a “mistake.”

This is not the first time Musk has clashed with the SEC.

In 2018, he settled a lawsuit over tweets about taking Tesla private, agreeing to pay a $20 million fine and relinquishing his role as Tesla’s chairman.

Meanwhile, the SEC has been facing growing criticism due to its “regulation-by-enforcement” approach to the crypto industry.

Critics argue that the SEC has failed to establish a clear regulatory framework for cryptocurrencies, opting instead to pursue legal action against key industry players.

As reported, a coalition of seven U.S. states has come together to challenge the Securities and Exchange Commission’s (SEC) regulation of cryptocurrency.