Regulators once accused Elon Musk of fraud over a possible buyout that never happened. Now they are positioned to make similar allegations over one that did.
The Securities and Exchange Commission has been investigating Musk’s late disclosure of his purchases of Twitter stock before he took over the company. Excerpts of Musk’s testimony provided to the SEC, which came to light last month through a separate lawsuit, suggest Musk and his adviser brushed off compliance with a rule that required him to reveal his ownership once it passed 5% of Twitter’s shares.
Musk and his closest adviser on the trades didn’t seek legal advice, for instance, about how to follow the rule while building his stake despite the adviser telling the bank that they had, according to a lawsuit in Manhattan federal court brought by the Oklahoma Firefighters Pension and Retirement System against Musk and others. Musk waited to disclose his stake until he owned more than 9% and had an offer to join its board, according to court filings.
As part of seeking evidence for their lawsuit, the firefighters’ pension fund obtained transcripts of testimony that Musk and his adviser, Jared Birchall, gave to the SEC. The firefighters included parts of those transcripts in a revised complaint against Musk and the other defendants that they filed in late May.
The testimony could support a claim that Musk violated the rule so he could keep his trading secret and prevent Twitter’s share price from rising while he was buying it, lawyers said. The SEC has said in court papers that it is investigating whether Musk committed civil fraud by delaying his disclosure or misleading the market about his plans.
Musk’s attorneys haven’t yet responded in court to the revised complaint. They earlier disputed the firefighters’ allegations. Musk’s lawyers didn’t respond to requests for comment for this article.
Read more here from the Wall Street Journal.
