Elon Musk is facing a fraud lawsuit after “intentionally” waiting too long to disclose his stake in Twitter, now known as X. A U.S. judge ruled on Friday that the case will move forward, rejecting Musk’s attempt to dismiss the lawsuit.
U.S. District Judge Andrew Carter in Manhattan decided that former Twitter shareholders have a solid case. They claim Musk intentionally misled them by delaying his filings with the SEC and tweeting misleading information about his plans for the company. The lawsuit argues Musk secretly built his Twitter stake before eventually buying the company outright.
The SEC is also suing Musk over the same issue of late disclosure, according to Reuters.
The lawsuit, led by the Oklahoma Firefighters Pension and Retirement System, accuses Musk of missing the SEC deadline of March 24, 2022, to reveal he had bought 5% of Twitter. Instead, Musk waited until April 4, 2022, to announce his 9.2% stake. Plaintiffs argue this delay saved Musk over $200 million, while they sold their shares at unfairly low prices. Musk went on to buy Twitter for $44 billion in October 2022.
In his ruling, Judge Carter said Musk’s filing could be seen as misleading because it suggested he was a “passive” investor, not planning to take control of the company. Carter also highlighted two of Musk’s tweets from March 26, 2022, where he hinted at creating a Twitter rival and jokingly commented on changing Twitter’s bird logo to a doge. The plaintiffs argue these tweets misled investors and pointed to fraud, even though Musk’s lawyers claimed the tweets drew unwanted attention to him.
After Musk revealed his 9.2% stake, Twitter’s stock price shot up by 27% on April 4, 2022.
The case is called Oklahoma Firefighters Pension and Retirement System v. Musk et al, filed in the Southern District of New York, case number 22-03026.
