A federal judge in San Francisco on Thursday tentatively ruled that billionaire Elon Musk must testify again for the US Securities and Exchange Commission’s (SEC) investigation of his $44 billion takeover of Twitter.
During a hearing, Judge Laurel Beeler quickly rejected arguments by Musk’s attorney that SEC officials do not have the authority to issue subpoenas, saying the agency has broad investigative powers and that no judge would “second guess” an SEC inquiry.
She said Musk and the SEC must agree to a date for the world's richest person to provide another day of testimony, or she would set a date.
“You’ve got one more four-hour deposition, one more day of depositions to survive and it’s over. It seems unlikely there’s going to be any more hassle,” she said.
The SEC sued Musk in October to compel the Tesla and SpaceX chief executive to testify as part of an investigation into his 2022 purchase of social media giant Twitter, which he subsequently renamed X. Musk refused to attend a September interview for the investigation, said the SEC.
The agency is examining whether Musk followed the law when filing the required paperwork with the agency about his purchases in Twitter stock and whether his statements concerning the deal were misleading.
The court hearing is the latest spat in a years-long feud between Musk and the top US markets regulator, dating back to 2018 when he tweeted that he had “funding secured” to take the electric carmaker private.
The SEC has been investigating Musk’s Twitter takeover since April 2022, when he first disclosed he had purchased stock in the company. Musk gave the SEC documents for its probe and testified via videoconference for two half-day sessions that July, the SEC said in its filing. SEC attorneys said they have more questions for Musk after receiving new documents, and had sought additional testimony in September, but Musk would not comply.
In response to the SEC’s October lawsuit, Musk’s lawyers urged Beeler to deny the SEC’s request, calling the probe misguided. “The SEC’s pursuit of Mr. Musk has crossed the line into harassment,” they wrote in a filing last month. They argued that individual Securities and Exchange Commission attorneys do not have the legal authority to issue subpoenas for testimony.
The Securities and Exchange Commission rejected those claims, saying agency officials have legal authority to seek additional testimony as probes evolve.
On Thursday, Beeler within minutes sided with the SEC, emphatically dismissing Musk's attorney's arguments, although she conceded the demands of long-running investigations can be “frustrating.”
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Musk and the Securities and Exchange Commission have been sparring since his “funding secured” tweet in 2018. The SEC settled that case but the commission sued Musk again in 2019 for allegedly breaching that settlement. The tweets also prompted a shareholder lawsuit. A jury in February found Musk was not liable for misleading investors.
Over the years, the agency has opened multiple other probes into Musk and Tesla.
On April 4, 2022, Musk disclosed he had acquired a 9.2 per cent stake in Twitter. It was 11 days after the SEC’s deadline for such disclosures. Musk initially indicated via that regulatory filing that he planned to be a passive stakeholder, meaning he did not plan to take over the company.
Later that month, however, he announced plans to buy Twitter for $44 billion (€40 billion). He subsequently tried to get out of the deal, alleging Twitter was not disclosing the full extent of bot activity on its platform.
After being sued to complete the deal, Musk closed his acquisition of Twitter in late October 2022. — Reuters
