SEC says Musk should be punished if he continues to dodge testimony on Twitter
Elon Musk, CEO of SpaceX and Tesla and owner of X, watches the global sessions of the Milken Conference 2024 at The Beverly Hilton in Beverly Hills, California, U.S., May 6, 2024.
David Swanson | Reuters
The Securities and Exchange Commission has asked a federal judge to punish Elon Musk if he continues to violate a court order requiring him to testify in an investigation into his acquisition of Twitter in 2022.
The SEC is investigating whether Musk or anyone else working with him committed securities fraud in 2022. Tesla The CEO sold shares of his car company and bought back shares of Twitter before acquiring the company now known as X using financial leverage.
In May, a court ordered Musk to testify before financial regulators about the deal with Twitter.
“Musk has failed to appear before the SEC twice: first in September 2023, despite a lawful administrative summons, and last week, despite an explicit court order,” SEC attorney Robin Andrews said in a filing Friday.
According to the filing, Andrews asked the judge to consider sanctions if Musk continues to delay.
“The court must make clear that Musk’s fraudulent and delaying behavior must stop,” Andrews wrote.
The filing also revealed, in a footnote, that the SEC intends to ask the court to hold Musk in “civil contempt” for canceling his testimony on September 10, only giving the agency a few hours’ notice that he would not appear. Musk’s cancellation cost the SEC time and money after the agency sent staff to Los Angeles to take his testimony and he failed to appear for an investigative interview, the agency said.
Musk’s deposition in the investigation has been rescheduled for early October at the SEC’s office, the filing said.
“If the court does not take further action, there is nothing to prevent Musk from simply not showing up for that date,” Andrews wrote.
Musk’s lawyer, Alex Spiro, a partner at Quinn Emanuel in New York, wrote in a response that “such drastic action is inappropriate,” adding that the SEC and Musk agreed that rescheduling would be allowed in an emergency.
Additionally, Musk and his companies have “cooperated and are cooperating with the SEC in numerous other ongoing investigations,” Spiro wrote.
In a separate, civil lawsuit In connection with a similar deal with Twitter, the Oklahoma Firefighters Retirement and Pension System sued Musk in federal court in New York, accusing him of deliberately concealing his advanced investment in Twitter and his intention to acquire the company.
Lawyers for the pension fund argued that Musk influenced the decisions of other shareholders and put them at a disadvantage by failing to clearly disclose his investments and his intention to buy Twitter.
Discovery from that New York case revealed correspondence between an unnamed person at Morgan Stanley and Musk’s money manager, Jared Birchall. In the messages, the Morgan Stanley contact wrote in February 2022 that Musk’s Twitter stock-buying strategy was closely held.
“No one knows what is happening and why but you and me,” the Morgan Stanley person wrote. “Not compliance, not anyone.”
Read the court filing below:
