Musk in hot water with SEC for failure to comply with subpoena

What do you mean they aren't optional for billionaires?

The US Securities and Exchange Commission is taking Elon Musk back to court to compel his testimony in its ongoing investigation of the billionaire's purchase of Twitter stock and related SEC filings last year.

In its complaint, the SEC said Musk agreed to provide additional testimony after meeting with the Commission in July 2022. Neither Musk nor his lawyers made any indication that they intended to violate the SEC's subpoena issued in May 2023 compelling testimony in September, the SEC said.

Come September, however, Musk and his lawyers decided the X CEO wouldn't show up, and "attempted to justify his refusal to comply with the subpoena by raising, for the first time, several spurious objections," the SEC said. The SEC was asking for the second round of testimony because of "thousands" of additional documents – hundreds of which Musk himself had produced – that had come to light since their initial talk.

Musk's lawyers first sought to change the date of his testimony from September 14 to 15, which the SEC agreed to, but "Musk failed to appear … as required by the SEC's subpoena." After trying to reschedule again, Musk's team came back with five objections, none of which the SEC said is a "valid basis for failing to comply." 

Musk objected to San Francisco as the testimony location, and said the SEC was just harassing him with its requests. He also complained he had already talked to the SEC and didn't need to again, said his team needed time to process the contents of Walter Isaacson's new biography of the billionaire and complained that "in the context of an investigation into the timing and substance of a schedule 13G, enough is enough." 

The 13G form Musk's lawyers referred to has to do with proper disclosure of his purchase of 9.2 percent of Twitter stock prior to his $44 billion takeover, which the SEC claimed last year Musk had failed to adequately disclose. That's not the extent of the SEC's "ongoing non-public investigation," though. 

"The SEC's investigation pertains to considerably more than the timing and substance of a particular SEC filing; it also relates to all of Musk's purchases of Twitter stock in 2022 and his 2022 statements and SEC filings," the SEC said.

Musk's purchase of 9.2 percent of Twitter was above the 5 percent threshold triggering the need to file an SEC document, which Musk allegedly did not file by March 2022, months after he had begun acquiring his stake in the company.

Musk has previously complained of SEC harassment in connection to his 2019 SEC consent decree requiring his lawyers to vet tweets about Tesla. Musk has tried and failed several times to get the decree lifted, most recently in February of this year.

By failing to comply with the subpoena, the ball is in Musk's court to prove he doesn't need to comply, a high burden that the SEC said Musk can't meet. "He did not raise any objection to the SEC's subpoena until only two days prior to the date he was to appear for testimony. He then raised, for the first time, a total of five objections," the SEC said. "Not only are Musk's stated objections untimely, they are without merit."

In its subpoena enforcement request, the SEC proposed several dates in November and December when it is available to meet with Musk. It's unclear what the penalty for additional noncompliance could be, and the SEC declined to comment on the case.

Multiple law firms specializing in federal litigation said penalties can be quite steep – and can include jail time. 

Musk's lawyers didn't appear to have filed a response with the court as of writing, and we were unable to reach anyone representing him for comment. ®

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