SEC Requests Elon Musk Sanction for Avoiding Twitter Acquisition Deposition Amid SEC Probe

The Securities and Exchange Commission (SEC) has requested a federal judge to impose sanctions on Elon Musk for non-compliance with a court order to attend a deposition regarding his 2022 acquisition of Twitter, now called X. The investigation pertains to the potential securities fraud by Musk and his associates during his leveraged buyout of Twitter, following his sale of Tesla shares to finance the deal.

Legal Proceedings and Compliance Issues

The SEC's request for sanctions arises from Musk's absence at two scheduled depositions as mandated by the court. The first instance occurred in September 2023, where Musk allegedly defied a lawful administrative subpoena. The second instance was a clear violation of a court order mandating his presence for a deposition in a probe regarding the Twitter acquisition. The failure to attend these depositions has prompted the SEC to seek legal sanctions against Musk.

According to SEC attorney Robin Andrews, Musk's repeated failures to attend the depositions constitute gamesmanship and delay tactics that hinder the progress of the investigation. The filing also revealed intentions to hold Musk in civil contempt for his cancellation of a deposition on September 10, notifying the SEC only hours in advance of his non-appearance. This last-minute cancellation resulted in significant time and financial investment for the SEC, as personnel were dispatched to Los Angeles for the deposition, which Musk ultimately did not attend.

The SEC's rescheduled deposition for Musk is now set for early October at an SEC office. However, concerns have been raised regarding Musk's potential failure to appear at this rescheduled date, leading the SEC to seek court intervention to ensure his compliance.

Elon Musk's Legal Counsel Response

In response to the SEC's request for sanctions, Musk's attorney, Alex Spiro, vehemently opposed the SEC's proposed action, labeling it as drastic and inappropriate. Spiro emphasized that the rescheduling of depositions was mutually agreed upon due to an emergency and that Musk and his companies have been cooperative with the SEC in various ongoing investigations.

In a separate legal matter related to the Twitter acquisition, the Oklahoma Firefighters Pension and Retirement System has filed a civil lawsuit against Musk in a federal court in New York. The lawsuit alleges that Musk deliberately concealed his progressive investments in Twitter and his intent to acquire the company. The pension fund's legal representatives argue that Musk's failure to disclose his investments and intentions in a transparent manner adversely impacted other shareholders' decisions.

Communications and Allegations

The ongoing legal proceedings have uncovered communications between an unnamed individual at Morgan Stanley and Jared Birchall, the executive managing Musk's financial interests. In these communications, it was noted that Musk's strategy for purchasing Twitter shares was closely guarded, with the Morgan Stanley representative stating that only the individual and Musk were privy to the details of the stock-buying strategy.

As legal battles continue to unfold, the SEC's efforts to ensure compliance from Musk in the ongoing probe of his Twitter acquisition are met with resistance from Musk's legal team. Simultaneously, the civil lawsuit filed by the Oklahoma Firefighters Pension and Retirement System adds another layer of complexity to the legal challenges surrounding Musk and his business dealings.

The outcome of these legal proceedings could have significant implications for both Musk and the companies he leads, with potential sanctions and civil penalties at stake. As the case progresses, the legal landscape surrounding Musk's $44 billion acquisition of Twitter is likely to remain a focal point of legal scrutiny in the months to come.