Elon Musk in Legal Trouble Over Alleged Fraud in Twitter Share Disclosure

In a major legal setback for Elon Musk, a U.S. judge on Friday rejected his attempt to dismiss a lawsuit accusing him of defrauding Twitter shareholders over his investment in the company. The ruling came shortly after Musk announced the sale of social media platform X to an AI company, according to a report by Reuters.

Manhattan District Judge Andrew Carter ruled that shareholders of the platform, formerly known as Twitter, had presented sufficient evidence suggesting that Elon Musk intentionally committed fraud. This included an improper regulatory filing, misleading statements about the platform’s future, and a calculated strategy to quietly amass his stake in the company.  

Musk, who currently leads the Department of Government Efficiency (DOGE) under U.S. President Donald Trump, also oversees his other ventures, including SpaceX and Tesla. In addition to the shareholder lawsuit, the U.S. Securities and Exchange Commission (SEC) is also suing Musk for failing to properly disclose his investment.

The plaintiffs alleged that in 2022, Elon Musk failed to meet the deadline to disclose his purchase of 5% of Twitter’s shares and repeated the violation when he later increased his stake to 9.2%.

The plaintiffs argued that Musk’s actions saved him over $200 million while causing financial harm to them, as they sold their shares at artificially low prices. Musk went on to acquire the platform in October 2022. Judge Carter noted that Musk’s 9.2% stake could be misleading, as it suggested he was making a short-term investment rather than planning to buy the company. On April 4, 2022, after Musk disclosed his 9.2% stake, Twitter’s share price surged by up to 27%.

Judge Carter ruled that the platform’s shareholders had legitimate grounds to sue Musk over two tweets from March 26, 2022. In one, he stated he was “giving serious thought” to creating a rival to Twitter, and in another, he responded to a suggestion that he buy Twitter and replace its bird logo with a Doge by saying, “Ha ha that would [be] sickkk.”