Federal Court Orders Elon Musk To Testify In SEC Twitter Takeover Probe

The US Securities and Exchange Commission (SEC) continues its pursuit of Elon Musk, to force him to testify in the ongoing investigation of his $44 billion purchase of Twitter (now known as X), after the billionaire had refused a previous subpoena last year.

Reuters reported that a federal court on Tuesday ordered that Elon Musk must testify again, after Musk had alleged the SEC was trying to “harass” him with a number of subpoenas.

Elon Musk has for years maintained a public feud with the SEC, and matters only worsened in October 2023, when US regulator sued to compel Musk to testify, after he had failed to testify on 15 September 2023.

Twitter purchase

The whole issue stems from when the SEC in May 2022 started looking into Musk’s disclosure of his initial stake in Twitter, questioning whether he filed the appropriate paperwork. The regulator is also looking into whether Musk’s statements in relation to buying the platform were accurate.

This was because Musk had first acquired a 5 percent stake in Twitter in March 2022, but he made a late disclosure in April 2022, when he surprised the markets by revealing he had increased his shareholding to 9.2 percent.

Musk denied at the time he was intending an acquisition or takeover of Twitter.

Musk then accepted an offer of a seat on Twitter’s board of directors, but just days before he was due to join the board, he suddenly declined.

Musk then announced his takeover offer for Twitter and signed a deal, agreeing to purchase the firm for $54.20 per share.

Multiple lawsuit were filed against Musk in 2022, from disgruntled shareholders who alleged Musk had carried out stock market manipulation.

September refusal

The SEC investigation had continued throughout the drama of Musk’s chaotic acquisition of the platform in late October 2022, and his controversial actions following that takeover.

The US regulator in 2023 noted that Musk had testified twice (via two separate video conference calls) as part of the SEC’s investigation in July 2022, and had produced “hundreds of documents” to federal investigators.

But the court filing last year revealed that the SEC had served Musk in May 2023 with a subpoena to testify again in the matter. That subpoena sought evidence and testimony from Musk that the SEC said at the time that it does not yet possess.

Musk had agreed to testify on 15 September 2023 at the SEC office in San Francisco, but in an extraordinary move, Musk “abruptly notified the SEC” two days before his scheduled appearance that he would not attend.

Musk alleged that the US regulators had leaked information to the media. Musk’s team also argued the investigation was frivolous, and it said document requests as well as demand for testimony again in the face of an investigation “arising from the accidental tardiness of a clerical filing” was troubling government action.

The SEC attempted to negotiate with Musk to conduct the deposition in Texas in October or November, but it was alleged that Musk had a “blanket refusal to appear for testimony.”

Court order

In February 2024 US Magistrate Judge Laurel Beeler ruled in favour of the US regulator to compel the deposition.

But Reuters reported that Musk then requested a review of that decision.

Now a federal court has ruled Musk must comply.

“As Judge Beeler explained, the investigations Musk contends constitute harassment are ‘legitimate government investigations’,” US district Judge Jacqueline Scott Corley reportedly said on Tuesday.

“Musk has not met his burden of demonstrating the subpoena is unreasonable,” said Judge Corley.

Public feud

Musk’s feud with the SEC stems from August 2018, when Musk surprised the markets, when he tweeted that he was considering taking Tesla private and he had secured funding to do so.

After the privatisation never materialise, the SEC sought to ban Elon Musk from acting as an officer or director of a publicly traded company.

In the end, the US financial regulator forced Musk to step down as chairman of Tesla and pay $20m in penalties. In addition, Tesla itself also had to pay a $20 million penalty.

Musk however was allowed to retain the Tesla CEO role and have his subsequent tweets about Telsa vetted by a company lawyer – a process that he has allegedly broken on multiple occasions and he continues to try and scrap that oversight.

Musk has not helped his corner after he continued to insult the SEC over the years.

In October 2018 for example Musk tweeted that the US agency was the “shortseller enrichment commission.”

Then in December 2018 Musk publicly admitted that he had “no respect” for the SEC. Worse was to come in July 2020 when Musk tweeted this.

SEC, three letter acronym, middle word is Elon’s

— Elon Musk (@elonmusk) July 2, 2020

The message was widely read as having a vulgar meaning and comprising a major insult to the agency.