By Jonathan Stempel
(Reuters) -Elon Musk was sued on Tuesday by the U.S. Securities and Exchange Commission, which accused the world's richest person of waiting too long to disclose in 2022 he had amassed a large stake in Twitter, the social media company he later bought.
In a complaint filed in Washington, D.C. federal court, the SEC said Musk violated federal securities law by waiting 11 days too long to disclose his initial purchase of 5% of Twitter's common shares.
An SEC rule requires investors to disclose within 10 calendar days, or by March 24, 2022 in Musk's case, when they cross a 5% ownership threshold.
The SEC said that at the expense of unsuspecting investors, Musk instead bought more than $500 million of Twitter shares at artificially low prices before finally revealing his purchases on April 4, 2022, by which time he owned a 9.2% stake.
Twitter's share price rose more than 27% following that disclosure, the SEC said.
Tuesday's lawsuit seeks to force Musk to pay a civil fine and disgorge profits he didn't deserve.
Musk eventually purchased Twitter for $44 billion in October 2022, and renamed it X.
Alex Spiro, a lawyer for Musk, in an email called the SEC lawsuit the culmination of the regulator's "multi-year campaign of harassment" against his client.
"Today's action is an admission by the SEC that they cannot bring an actual case," he said. "Mr. Musk has done nothing wrong and everyone sees this sham for what it is."
Spiro added that the lawsuit addresses a mere "alleged administrative failure to file a single form--an offense that, even if proven, carries a nominal penalty."
OTHER LAWSUITS OVER TWITTER PURCHASES
Musk, an adviser to U.S. President-elect Donald Trump, is worth $417 billion according to Forbes magazine, through businesses such as the electric car maker Tesla (NASDAQ:TSLA) and rocket company SpaceX.
He is worth nearly twice as much as Amazon.com (NASDAQ:AMZN) founder Jeff Bezos, the world's second-richest person at $232 billion, Forbes said.
The SEC sued Musk six days before Trump's Jan. 20 inauguration.
SEC Chair Gary Gensler is stepping down that day, and Paul Atkins, who Trump nominated to succeed him, is expected to review many of Gensler's rules and enforcement actions.
Musk has also been sued in Manhattan federal court by former Twitter shareholders over the late disclosure.
In that case, Musk has said it was implausible to believe he wanted to defraud other shareholders, and that "all indications" were that his delay was a mistake.
Musk has long feuded with the SEC, including after it sued him in 2018 over his Twitter posts about possibly taking Tesla private and having secured funding to do so.
He settled that lawsuit by paying a $20 million civil fine, agreeing to have Tesla lawyers review some Twitter posts in advance, and giving up his role as Tesla's chairman.
The SEC also sought sanctions from Musk after he missed court-ordered testimony last September for the Twitter probe, so he could attend the launch of SpaceX's Polaris (TSX:PIF) Dawn mission at Florida's Cape Canaveral.
A federal judge in San Francisco rejected that request, because Musk later testified and agreed to pay the SEC's travel costs.
The case is SEC v Musk, U.S. District Court, District of Columbia, No. 25-00105.