Elon Musk has agreed to pay a civic penalty in order to settle a lawsuit alleging that he intentionally cheated Twitter shareholders out of millions of dollars.
The US Securities and Exchange Commission’s civil lawsuit accused the world’s richest person of waiting 11 days too long to disclose that he had passed the 5 per cent ownership threshold of Twitter during his purchase of the platform in 2022.
Musk, who did not admit any wrongdoing as part of the agreement, allegedly saved around $150 million by not disclosing his initial purchase.
A trust in Musk's name will pay a $1.5 million civil fine, under the settlement disclosed on Monday in the Washington, D.C., federal court.
The settlement requires approval by US District Judge Sparkle Sooknanan, who in February rejected Musk's bid to dismiss the case.
It ends more than seven years of fraught battles between Musk and the regulator, starting in September 2018 when the SEC charged him with securities fraud for tweeting he had "secured" funding to potentially take his electric car company Tesla private.
Musk settled that case by paying a $20 `million civil fine, letting Tesla lawyers review some Twitter posts in advance, and giving up his role `as Tesla's chairman.
"Mr. Musk has now been cleared of all issues related to the late filing of forms in the Twitter acquisition, as we said from the outset he would be," his lawyer Alex Spiro said in a statement.
The SEC declined to comment. The SEC had argued that Musk should pay a civil fine and repay the $150 million he allegedly saved at the expense of unsuspecting investors. Musk called the delay inadvertent, and accused the SEC of violating his free speech rights by targeting him.
The SEC sued Musk six days before former US President Joe Biden left the White House and was replaced by Donald Trump. Current SEC Chairman Paul Atkins has been refocusing the regulator's enforcement priorities.
"It's an embarrassing day for the SEC," said Amanda Fischer, former chief of staff to Gary Gensler, who chaired the regulator during the Biden administration. She said the settlement "should cause the public to question whether the SEC is protecting White House insiders at the expense of ordinary investors.”
Musk led the Trump administration's `Department of Government Efficiency, which focused on cost-cutting, before leaving last May. Robert Frenchman, a partner at the Dynamis law firm in New York, said the $1.5 million penalty was a "modest sum for the richest person on the planet" but could deter similar violations by others.
"That is a statement to the market that the rules apply to everyone, even to Elon Musk," he said. Musk completed the $44 billion Twitter purchase in October 2022.
He later folded Twitter, now known as X, into his artificial intelligence company xAI, and then folded xAI into his rocket company SpaceX.
Musk is currently involved in a separate lawsuit involving fellow OpenAI co-founder Sam Altman.
The clash, which is taking place in a federal courthouse in California, comes after Musk accused Altman of breaking from OpenAI’s original non-profit mission.
Additional reporting from agencies.
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