Elon Musk Faces Fraud Lawsuit Over Delayed Disclosure of Twitter Stake
A U.S. judge has ruled that Elon Musk Face Fraud lawsuit filed by former Twitter shareholders. The lawsuit accuses Musk of defrauding investors by delaying his disclosure of his initial stake in Twitter, now known as X. Shareholders claim Musk’s late filing of his investment led to significant financial losses [ Elon Musk Face Fraud ].
Judge Rejects Musk’s Bid to Dismiss Lawsuit
On March 28, U.S. District Judge Andrew Carter in Manhattan rejected Musk’s attempt to dismiss the fraud claims. The lawsuit, led by the Oklahoma Firefighters Pension and Retirement System, accuses Musk of intentionally avoiding timely disclosure of his investment. This delay, the plaintiffs argue, misled investors and caused them to sell Twitter shares at artificially low prices. Musk only revealed his 5% stake on March 24, 2022, and waited until April to disclose his 9.2% stake.
The Alleged Fraud and Its Impact
The lawsuit claims Musk’s delayed filings allowed him to save over $200 million. Shareholders argue that they sold their shares at a loss due to Musk’s late disclosure. Musk eventually bought Twitter for $44 billion in October 2022. The plaintiffs also argue that Musk’s tweets and filings misled the public and violated SEC regulations.
Disputed Tweets and Regulatory Violations
Judge Carter pointed out that Musk’s tweets, including a March 26, 2022 post where he said he was “giving serious thought” to creating a Twitter rival, could suggest fraudulent intent. The case also highlights Musk’s tweet about changing Twitter’s bird logo to a “doge,” which may have misled investors. Musk’s legal team argues the tweets were not fraudulent, but the judge found the plaintiffs’ argument compelling.
Shareholder Impact and Market Reaction
After Musk disclosed his 9.2% stake, Twitter shares rose 27% by April 4, 2022. Shareholders argue that if Musk had disclosed his investment sooner, they could have avoided selling their shares at a loss. The case continues in the Southern District of New York, with plaintiffs seeking damages for their alleged losses.
