Playing victim won’t help Musk avoid testifying in SEC probe of Twitter buyout

Musk, playing victim, SEC probe,

Elon Musk has agreed to testify in the ongoing investigation by the US Securities and Exchange Commission (SEC) into his acquisition of Twitter. Musk had previously tried to avoid testifying by arguing that the SEC had already deposed him twice, claiming that the most recent subpoena was part of a series of abuses by the SEC. However, the court rejected Musk’s argument, stating that his deposition was necessary given the thousands of new documents that have been submitted since his last deposition.

US District Judge Jacqueline Scott Corley, in an order requiring Musk and the SEC to agree on a deposition date, stated that “Musk’s lament does not come close to meeting his burden of proving ‘the subpoena was issued in bad faith or for an improper purpose.'” Corley also pointed out that initial depositions are crucial for helping the agency identify relevant documents for further investigation.

The court filing revealed that Musk did not win his fight to be deposed remotely. Instead, he has agreed to an in-person deposition lasting no more than five hours. The SEC argued that an in-person deposition would allow for a better assessment of Musk’s demeanor and would be more efficient than dealing with technological issues that arose during a previous remote deposition.

Musk’s deposition is expected to be scheduled by mid-July. He will likely testify about his Twitter stock purchases before acquiring the platform, as well as his other investments related to the acquisition. The SEC is investigating whether Musk violated securities laws by not disclosing his Twitter stock purchases within the required timeframe.

Musk missed a deadline to disclose his purchases by 11 days, as he amassed close to a 10 percent stake in the company. A proposed class action lawsuit from Twitter shareholders has accused Musk of intentionally missing the deadline to keep Twitter stock prices artificially low while preparing for his purchase. An amended complaint filed by an Oklahoma firefighters pension fund alleges that Musk’s scheme was carried out with the help of an unnamed Morgan Stanley banker.

The firefighters claim that the goal of Musk’s strategy was to acquire Twitter “cost effectively” and that the banker was motivated to acquire billions of dollars of Twitter securities without alerting the market. The complaint further alleges that Morgan Stanley earned over $1.4 million in commissions for executing the secret stock acquisition scheme. It also suggests that Musk paid Morgan Stanley an estimated $42 million in fees for its involvement in the Twitter deal.

The complaint points to messages from the banker that emphasized the need to keep the trading activities quiet to avoid suspicion. As a result of the secrecy surrounding Musk’s stock purchases, Twitter investors allegedly suffered significant damages when Musk belatedly disclosed his interests, causing the stock price to skyrocket.

According to the complaint, Musk went from owning zero shares of Twitter stock in January 2022 to secretly acquiring over 70 million shares in April 2022, spending over $2.6 billion in the process.

This latest development in the SEC’s investigation into Musk underscores the significance of transparency and timely disclosures in the securities industry. Musk’s alleged attempts to manipulate the stock price of Twitter through delayed disclosures and secret acquisitions raise concerns about the integrity of the market and the fairness of the investing process.

Moreover, the involvement of a prominent investment bank like Morgan Stanley adds another layer of complexity to the case. If the allegations in the complaint are proven true, it raises questions about the bank’s role in facilitating Musk’s actions and whether it knowingly participated in a scheme to defraud other investors.

The outcome of the SEC’s investigation will have significant implications not only for Musk and Twitter but also for the broader securities industry. It will serve as a reminder that even high-profile individuals and companies must adhere to the rules and regulations governing the market.

In conclusion, Elon Musk’s agreement to testify in the SEC’s investigation into his acquisition of Twitter is a significant development in the case. While Musk initially tried to avoid testifying, the court rejected his arguments, highlighting the importance of transparency and timely disclosures in the securities industry. The involvement of a prominent investment bank adds another layer of complexity to the case, raising concerns about potential market manipulation and fraud. The outcome of the investigation will have far-reaching implications for Musk, Twitter, and the broader securities industry.

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