Elon Musk is under investigation by the U.S. Securities and Exchange Commission (SEC) for missing a court-ordered deposition regarding his $44 billion purchase of Twitter. The SEC is now seeking sanctions against him.
The SEC announced on Friday that it will pursue penalties after Musk canceled his testimony just three hours before the scheduled time on September 10, according to Reuters.
In a filing with a San Francisco federal court, the SEC requested an order requiring Musk to explain why he shouldn’t be held in civil contempt for not appearing.
Musk’s Absence Violates Court Order
The SEC argues that Musk’s decision to skip the deposition violated a May 31 court order compelling his testimony.
On the day of the deposition, Musk, who leads Tesla and SpaceX, was at Cape Canaveral in Florida overseeing the launch of SpaceX’s Polaris Dawn mission. While Musk is SpaceX’s chief technical officer, the SEC believes he knew about the launch date well in advance, based on internal discussions two days earlier.
Robin Andrews, a lawyer for the SEC, accused Musk of using delay tactics. “Musk’s excuse smacks of gamesmanship,” Andrews wrote in the filing. He urged the court to stop Musk’s delaying actions.
Musk’s attorney, Alex Spiro, called the SEC’s move for sanctions “drastic” and unnecessary. He said Musk’s presence was crucial for the astronauts’ safety during the mission, and the testimony had already been rescheduled for October 3. Spiro explained that the cancellation was an emergency and won’t happen again.
The SEC hasn’t commented further but noted that there’s no guarantee Musk will appear for the October 3 testimony.
SEC’s Investigation into Musk’s Twitter Stock Disclosure
The SEC is investigating whether Musk broke securities laws by failing to disclose his early 2022 purchase of Twitter stock in a timely manner. Regulations require investors to disclose ownership once they acquire 5% of a public company’s shares. Musk delayed reporting his 9.2% Twitter stake, which led to accusations of misleading shareholders.
Musk claimed that the delay was a misunderstanding of the disclosure requirements. He called it a mistake.
This isn’t Musk’s first legal battle with the SEC. In 2018, he settled a lawsuit over tweets about taking Tesla private, paying a $20 million fine and stepping down as chairman of Tesla.
SEC’s Regulatory Approach Faces Criticism
The SEC has recently faced criticism for its “regulation-by-enforcement” approach to cryptocurrency. Many believe the agency hasn’t provided clear rules for cryptocurrencies, choosing instead to take legal action against industry leaders.
A coalition of seven U.S. states has now joined forces to challenge the SEC’s stance on cryptocurrency regulation.
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