Musk Seeks Dismissal of SEC Lawsuit, Says He Was Targeted for Criticism of Government Overreach

In a new filing, Musk argues the lawsuit is politically motivated and constitutionally flawed.

Elon Musk listens as President-elect Donald Trump addresses a House Republicans Conference meeting at the Hyatt Regency on Capitol Hill in Washington on Nov. 13, 2024. Andrew Harnik/Getty Images

Elon Musk has asked a federal judge to throw out a Securities and Exchange Commission (SEC) lawsuit accusing him of waiting too long to disclose his multibillion-dollar stake in Twitter, before he bought the platform, arguing the regulator is targeting him for political reasons.

In an Aug. 28 filing in the U.S. District Court for the District of Columbia, Musk’s lawyers said the SEC is pursuing him not for the substance of the violation but because of his outspoken criticism of regulators and government “overreach.”

“The Commission’s selective enforcement against Mr. Musk—seeking monetary relief more than 1,500 times larger than the relief imposed on similarly situated individuals in similar cases—reveals an agency targeting an individual for his protected criticism of government overreach,” the filing states.

Musk’s attorneys accused the SEC of selective prosecution and a “relentless” pursuit of their client, filing a lawsuit that is “unmoored from centuries of equitable jurisprudence and unconcerned with constitutional limits on governmental authority.”

The case stems from Musk’s purchases of Twitter stock in early 2022, before he acquired the company and rebranded it as X. Regulators say he crossed the 5 percent ownership threshold on March 14, 2022, triggering a 10-day deadline to make the holding public. Instead, Musk waited until April 4, 2022, to disclose a 9.2 percent stake, or 73.5 million shares.

“As a result, Musk was able to continue purchasing shares at artificially low prices, allowing him to underpay by at least $150 million for shares he purchased after his beneficial ownership report was due,” the SEC said in its original complaint filed on Jan. 14.

When, 11 days past the deadline, Musk finally publicly disclosed his stake in Twitter in a regulatory report, Twitter’s stock price surged by more than 27 percent over its previous day’s closing price.

“Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm,” the agency alleged.

The SEC is seeking civil penalties, disgorgement of profits, and injunctive relief barring future violations.

In a filing on Aug. 29, the agency rejected Musk’s request to dismiss the case and rejected his constitutional arguments, calling the case routine and asking the court to proceed to a hearing on remedies.

“This case involves a straightforward, strict liability violation of important public reporting requirements under the federal securities laws,” the SEC said. “There are no material facts in dispute and the SEC is entitled to judgment as a matter of law as to liability on its claim that Defendant Elon Musk violated Section 13(d) of the Exchange Act and Rule 13d-1 thereunder.”

Musk’s lawyers countered that he meant no harm and promptly met his reporting requirement once he became aware of the deadline.

“After Mr. Musk’s wealth manager consulted securities disclosure counsel about potential filing requirements, Mr. Musk immediately ceased purchasing additional shares and filed his disclosure the next business day,” his attorneys said.

“There is no ongoing violation. There is no intent. There is no harm. Simply put, this action is a waste of this Court’s time and taxpayer resources.”

An SEC spokesperson declined to comment in response to an inquiry from The Epoch Times.

The court will now weigh the dueling motions and issue a decision, which could send the case to a trial focused on penalties and remedies or throw out the SEC’s lawsuit.

The dispute marks the latest clash between the billionaire entrepreneur and Wall Street’s top regulator. Musk has been sparring with the SEC for years. In 2018, the agency sued him over a post he made on social media claiming he had “funding secured” to take Tesla private at $420 a share.

That case ended in a settlement requiring Musk to step down as Tesla chairman, pay a $20 million fine, and agree to have some of his communications pre-approved by company lawyers. Musk later called the deal a “government-imposed muzzle” on his free speech and has repeatedly argued that the SEC unfairly singled him out because of multiple remarks he made that were critical of excessive regulations and what he called bureaucratic “overreach.”