Elon Musk and SEC to face off in court over Twitter testimony

[December 14, 2023]  By Chris Prentice

(Reuters) - The U.S. Securities and Exchange Commission will face off with lawyers for Elon Musk in a San Francisco court on Thursday as it tries to force the billionaire to testify again for its probe of his $44 billion takeover of Twitter.

The SEC sued Musk in October to compel him to testify as part of an investigation into his 2022 purchase of social media giant Twitter, which he subsequently renamed X. Musk refused to attend a September interview for the probe, the SEC said.

The agency is examining whether Musk, the world's richest person, followed the law when filing the required paperwork with the agency about his purchases in Twitter stock, and whether his statements in relation to the deal were misleading.

The court hearing is the latest spat in a years-long feud between Musk and the top U.S. markets regulator, dating back to 2018 when he tweeted that he had "funding secured" to take the electric carmaker private.

The SEC has been probing Musk's Twitter takeover since April 2022, when he first disclosed he had purchased stock in the company. Musk gave the SEC documents for its probe and testified via videoconference for two half-day sessions that July, the SEC said in its filing. SEC attorneys said they have more questions for Musk after receiving new documents, and had sought additional testimony in September, but Musk would not comply.

In response to the SEC's October lawsuit, Musk's lawyers urged U.S. Magistrate Judge Laurel Beeler to deny the SEC's request, calling the probe misguided. "The SEC's pursuit of Mr. Musk has crossed the line into harassment," they wrote in a filing last month. They argued that individual SEC attorneys do not have the legal authority to issue subpoenas for testimony.

The SEC rejected those claims, saying agency officials have legal authority to seek additional testimony as probes evolve.

On Thursday, the judge is expected to hear arguments from both sides in a hearing scheduled for 9:30 a.m. PST (1730 GMT). The SEC will need to show that the probe falls within its authority, that it has followed procedural requirements, and that the evidence it is seeking is relevant and material.

Tesla CEO Elon Musk arrives at Manhattan federal court for a hearing on his fraud settlement with the Securities and Exchange Commission (SEC) in New York City, U.S. April 4, 2019. REUTERS/Brendan McDermid/File Photo

Legal experts have said they think the judge is likely to side with the SEC, although she could impose some conditions.

TWITTER TAKEOVER

Musk and the SEC have been sparring since his "funding secured" tweet in 2018. The SEC settled that case but the commission sued Musk again in 2019 for allegedly breaching a that settlement. The tweets also prompted a shareholder lawsuit. A jury in February found Musk was not liable for misleading investors.

Over the years, the agency has opened multiple other probes into Musk and Tesla.

On April 4, 2022, Musk disclosed he had acquired a 9.2% stake in Twitter. It was 11 days after the SEC's deadline for such disclosures. Musk initially indicated via that regulatory filing that he planned to be a passive stakeholder, meaning he did not plan to take over the company.

Later that month, however, he announced plans to buy Twitter for $44 billion. He subsequently tried to get out of the deal, alleging Twitter was not disclosing the full extent of bot activity on its platform.

After being sued to complete the deal, Musk closed his acquisition of Twitter in late October 2022.

(Reporting by Chris Prentice; Additional reporting by Jody Godoy in New York; Editing by Michelle Price and David Gregorio)

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