Elon Musk Avoids $44B Twitter Purchase Probe As US Court Junks SEC's Bid for Sanction

Musk's legal team contested that he already testified in October, therefore, avoiding penalties after missing a prior court date.

By Thea Felicity

Nov 23 2024, 02:31 AM EST

FRANCE-TECHNOLOGY-IT-VIVATECH — SpaceX, Twitter and electric car maker Tesla CEO Elon Musk speaks during an event at the Vivatech technology startups and innovation fair at the Porte de Versailles exhibition centre in Paris, on June 16, 2023. JOEL SAGET/AFP via Getty Images

Earlier this year, the SEC started a probe into Elon Musk's 'suspicious' acquisition of Twitter, now X, with an anticipated sanction due to his absence in court.

However, the US federal judge recently refused to hold the Tesla CEO liable for penalties after his failure to heed the court order to testify in September 2024. Musk, instead, testified in October and covered $2,923 for the travel fees of the SEC.

Reuters reported that the judge, Jacqueline Scott Corley, found that the sanctions were not necessary since they would not be of much service since Musk had already complied.

The SEC is focusing on Musk's Twitter purchase valued at $44 billion. They are investigating if he broke the securities laws in 2022 when he delayed revealing his stock purchases. There is a legal requirement for investors who buy significant shares in a company to declare it within ten days. According to sources, it was more than ten days before he revealed his growing stake in Twitter.

Critics argue this gave him the opportunity to buy shares at a cheaper price before the market responded to the news.

Why SEC Wants Musk Penalized

The SEC brought sanctions because Musk defied the first court order to testify in September. They argued that reimbursing travel costs was insufficient to deter others, including wealthy individuals like Musk, from ignoring court orders. Musk's lawyers tried to argue that he satisfied the requirement when he testified in October.

The judge concurred and, considering that the issue is already closed further sanctions would not serve any purpose.

Notably, this is not Musk's first run-in with the SEC. In 2018, for instance, he was sued over a tweet about taking Tesla private, and he agreed to have his future social media posts vetted by Tesla lawyers, in a deal requiring him to pay $20 million.

The latest investigation is part of the continuous scrutiny that the SEC maintains over Musk's activities, particularly on the topic of transparency in his business dealings.

While Musk has avoided penalties this time, the SEC's investigation into the Twitter deal continues. Their focus remains on whether Musk's delayed disclosure gave him an unfair advantage, potentially violating securities laws.