Elon Musk will face fraud charges for late disclosing Twitter stake By Reuters

2023-10-03 19:40:43

© Reuters. Elon Musk
13/09/2023
REUTERS/Leah Millis

NEW YORK (Reuters) – A U.S. judge has ruled that Elon Musk faces the bulk of a lawsuit alleging he fraudulently misled former Twitter shareholders last year by waiting too long to disclose that he had invested in the company. social media company, which he later bought and renamed as X.

In a decision made public on Monday, U.S. District Judge Andrew Carter allowed shareholders — in the proposed class action — to try to prove that Musk intended to deceive them by waiting 11 days after the SEC deadline. the capital markets in the US, to reveal that it had purchased 5% of Twitter.

The judge in Manhattan, on the other hand, rejected an allegation of “insider trading” against Musk, the richest person in the world.

Musk’s lawyers did not immediately respond Tuesday to requests for comment.

According to shareholders, Musk saved more than $200 million by increasing his stake in Twitter and discreetly talking to its executives about his plans, before finally disclosing a 9.2% stake in April 2022.

Shareholders also said they sold Twitter shares at artificially low prices because Musk hid what he was doing.

Lawyers for Musk have argued that their client is “one of the busiest people on the planet” and that any failure to disclose is “inadvertent.”

Musk bought Twitter for $44 billion in October last year.

Under SEC rule, investors have 10 days to disclose when they acquire 5% of a company.

Twitter shares rose 27% on April 4, 2022, from $39.31 to $49.97, after Musk revealed his 9.2% stake. Musk’s acquisition valued Twitter at $54.20 per share.

(Reporting by Jonathan Stempel in New York)