Elon Musk, CEO of SpaceX and Tesla and owner of X Corporation, watches the Milken Conference 2024 global conference sessions at the Beverly Hilton Hotel in Beverly Hills, California, U.S., May 6, 2024.
David Swanson | Reuters
The Securities and Exchange Commission has asked a federal judge to impose sanctions on Elon Musk if he continues to violate a court order to testify in an investigation into his 2022 takeover of Twitter.
The Securities and Exchange Commission was investigating whether Musk or someone else working with him committed securities fraud in 2022. Tesla The CEO sold shares in his automaker and boosted his stake in Twitter, before leveraging his purchase of the company now known as X.
In May, the court ordered Musk to appear before financial regulators to testify about the Twitter deal.
“Musk has now failed to appear before the SEC twice: first in September 2023, in defiance of a lawful administrative subpoena, and last week, in defiance of a clear court order,” SEC attorney Robin Andrews said in the filing Friday.
Andrews asked the judge to consider sanctions if Musk delays further, according to the filing.
“The court must make clear that Musk’s cunning and delaying tactics must stop,” Andrews wrote.
The lawsuit also disclosed, in a footnote, that the SEC intends to ask the court to hold Musk in “civil contempt” for rescinding his Sept. 10 filing and giving the agency only hours’ notice that he would not appear. The SEC said Musk’s rescission cost the SEC time and money after it sent staff to Los Angeles to file his deposition and he failed to show up for an investigative interview.
Musk's deposition hearing in the probe has been postponed to a new date in early October at the SEC's office, according to the filing.
“Without further action by the court, there is nothing to deter Musk” from “simply failing to show up on this date,” Andrews wrote.
“Such a drastic measure would be inappropriate,” Musk’s lawyer, Alex Spiro, a partner at Quinn Emanuel in New York, wrote in response, adding that the SEC and Musk agreed that rescheduling would be permissible in light of the emergency.
Additionally, Musk and his companies “have cooperated and are cooperating with the SEC in several other ongoing investigations,” Spiro wrote.
In a separate civil suit related to the same deal with Twitter, the Oklahoma Firefighters Pension and Retirement Authority sued Musk in federal court in New York, accusing him of intentionally concealing his progressive investment in Twitter and his intention to buy the company.
The pension fund's lawyers say that Musk, by failing to clearly disclose his investments and intentions to buy Twitter, has influenced the decisions of other shareholders and put them at a disadvantage.
The New York investigation into that case turned up correspondence between an unnamed Morgan Stanley person and Jared Birchall, the executive who manages Musk’s money. In the messages, the Morgan Stanley contact wrote in February 2022 that Musk’s strategy to buy Twitter stock was confidential.
“No one knows what’s going on and why except you and me,” one Morgan Stanley employee wrote. “Not compliance, not anyone else.”
Read the court file below:
