After months of vehemently resisting a subpoena, Elon Musk has conceded to testify in the US Securities and Exchange Commission’s investigation into his acquisition of Twitter, now rebranded as X.
Musk contended that the SEC had already deposed him twice, arguing that the latest subpoena exemplified a “long string of SEC abuses of its investigative authority,” in a filing with a US district court in California. However, the court did not find his argument persuasive. According to an order from US District Judge Jacqueline Scott Corley, Musk failed to meet the burden of proving that the subpoena was issued in bad faith or for an improper purpose.
“Under Musk’s theory of reasonableness, the SEC must wait to depose a percipient witness until it has first gathered all relevant documents,” Corley noted in the order. “But the law does not support that theory. Nor does common sense. In an investigation, the initial depositions can help an agency identify what documents are relevant and need to be requested in the first place.”
Musk also failed to secure permission to testify remotely, a significant aspect given his prior experience with a remote deposition plagued by technical issues. Consequently, Musk has agreed to sit for an in-person deposition lasting no more than five hours, which the SEC argued would allow for a more efficient and straightforward assessment of his demeanor.
Musk’s deposition, now slated for mid-July, is expected to cover his Twitter stock purchases prior to his acquisition of the platform, as well as other connected investments. The SEC has been investigating whether Musk breached securities laws requiring disclosures within ten days from anyone who acquires more than a 5 percent stake in a company. Musk missed this deadline by 11 days, amassing close to a 10 percent stake while preparing to purchase Twitter.
A proposed class action lawsuit from Twitter shareholders suggests he intentionally missed the deadline to keep stock prices artificially low. An amended complaint filed by an Oklahoma firefighters pension fund detailed Musk’s alleged scheme, claiming that his goal was to acquire Twitter cost-effectively through a Morgan Stanley banker who allegedly facilitated the secret stock acquisition.
The complaint further alleged that Morgan Stanley reaped over $1,460,000 in commissions for their role in the acquisition and subsequently earned an estimated $42 million in advising fees from Musk for the Twitter deal.
Following these acquisitions, Musk “belatedly disclosed his Twitter interests” on April 4, 2022, causing the stock price to predictably skyrocket and allegedly resulting in significant damages for Twitter investors, the complaint states.
For further details, visit the full article on Ars Technica.