The SEC is suing Elon Musk. It’s all in the timing

As the clock runs out on the Biden administration, the U.S. Securities and Exchange Commission filed suit Elon Musk In federal court. The statute at hand is relatively straightforward. Complaint timing is more complicated.

The SEC’s complaint centers on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to notify the agency within 10 calendar days that he had acquired more than 5 percent of the company’s common stock. If true, that delay would violate federal securities laws. “As a result, Musk was able to continue buying shares at artificially low prices,” the SEC said complaint“Allowing him to pay at least $150 million less for the shares he bought after reporting his beneficial ownership.” The SEC sought a jury trial.

This should all be pretty easy. “This looks like a straightforward case about a clear violation of a well-established SEC rule,” said James Park, a professor at the UCLA School of Law who focuses on securities regulation and corporate law. You either file your papers within 10 days or you don’t; The SEC claims that Musk did not. He acquired enough shares to exceed that threshold by March 14 of that year, the agency alleged, and did not publicly disclose his ownership until April 4. (The SEC alleged that Musk was technically 11 days late, because he continued to buy shares. March 24.)

Still, it took almost three years for the SEC to bring the case. “The question is, why are they doing it now,” said David Rosenfeld, former co-chief of the SEC’s New York enforcement office and now a professor at Northern Illinois University College of Law. “The only logical answer is that they want to get it done before the administration changes.” Rosenfeld notes that he has not reviewed the SEC complaint in depth.

That executive branch change, which occurred in less than a week, creates a more favorable regulatory environment for Musk, who Donated hundreds of millions of dollars He was reportedly on a political action committee supporting Donald Trump’s presidential campaign and a close adviser to the president-elect during the transition. Current SEC Chair Gary Gensler will likely be replaced by Trump nominee Paul Atkins, who is widely seen as a supporter. Light controller touch.

Musk’s lawyer, Alex Spiro, said he believes the indictment is a parting shot. “With the SEC backing down and leaving office, the SEC’s multi-year harassment campaign against Mr. Musk culminated in the filing of a single-count tiki-tack complaint against Mr. Musk,” he wrote in an email.

Although the filing comes just before Trump’s Jan. 20 inauguration, the investigation leading to the allegations has been going on for years. The agency had to subpoena Musk in May 2023 to get his testimony in the investigation and said Musk canceled them two days before his scheduled testimony in September. A federal court upheld an earlier decision to compel him to testify in May 2024; SEC lawyers went out to interview him on September 10, but he stood them up Once again to attend the SpaceX launch.