Elon Musk must face fraud lawsuit for disclosing Twitter stake late


FILE PHOTO: Elon Musk arrives for a bipartisan Artificial Intelligence (AI) Insight Forum for all U.S. senators hosted by Senate Majority Leader Chuck Schumer (D-NY) at the U.S. Capitol in Washington, U.S., September 13, 2023. REUTERS/Leah Millis/File Photo

NEW YORK (Reuters) - Elon Musk was ordered by a U.S. judge to face most of a lawsuit claiming he defrauded former Twitter shareholders last year by waiting too long to disclose that he had invested in the social media company, which he later bought and renamed X.

In a decision made public on Monday, U.S. District Judge Andrew Carter said shareholders in the proposed class action could try to prove that Musk intended to defraud them by waiting 11 days past a U.S. Securities and Exchange Commission deadline to reveal he had bought 5% of Twitter's shares.

The judge in Manhattan also dismissed an insider trading claim against Musk, the world's richest person.

Lawyers for Musk did not immediately respond on Tuesday to requests for comment.

Shareholders led by an Oklahoma firefighters pension fund said Musk saved more than $200 million by adding to his Twitter stake, and quietly talking with its executives about his plans, before finally disclosing a 9.2% stake in April 2022.

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

Musk's lawyers argued that their client was "one of the busiest people on the planet," and that any disclosure failure was "inadvertent."

Carter said he could not infer that Musk was "too busy" to comply with SEC rules if he could find time to buy Twitter shares, meet with company executives, and post online about Twitter.

He also found evidence that Musk understood the 5% disclosure rule, including that he had testified about it under oath, and had properly disclosed stakes in his electric car maker Tesla and the former SolarCity at least 20 times.

Katie Sinderson, a lawyer for the plaintiffs, declined to comment.

Musk bought Twitter for $44 billion last October.

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

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

The case is Oklahoma Firefighters Pension and Retirement System v. Musk et al, U.S. District Court, Southern District of New York, No. 22-03026.

(Reporting by Jonathan Stempel in New York; Editing by Will Duham)

Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

   

Next In Tech News

Govt to continue blocking morally compromised social media platforms, says Fahmi
GlobalFoundries names chip industry veteran Hollister as CFO
US military spaceplane poised for 7th launch, first atop SpaceX Falcon Heavy
Tucker Carlson's streaming service to charge $9 per month
Crypto market eyes interest rates and expected bitcoin ETFs in 2024
China-led team creates soft ‘octopus’ arm in reach for intuitive human-robot interaction
Nvidia to expand partnership with Vietnam, support AI development - CEO
Apple shutters third-party apps that enabled iMessage on Android
Tesla’s Dojo supercomputer head exits in blow to efforts
TikTok to invest $1.5 billion in GoTo's Indonesia e-commerce business

Others Also Read