The US Securities and Exchange Commission (SEC) has issued a “settlement demand” to Elon Musk, the billionaire entrepreneur disclosed in a social media post on Thursday.
The demand comes as part of an ongoing investigation into Musk’s 2022 dealings related to his acquisition of Twitter, now X.
According to a letter shared by Musk’s attorney, Alex Spiro of Quinn Emanuel, the SEC has called for Musk to agree to a settlement, which includes a financial penalty, or “face charges on numerous counts” related to his “purchases, sales, and disclosures of Twitter shares.” The letter, addressed to SEC Chair Gary Gensler, also alleges that the SEC’s demand was accompanied by a 48-hour deadline.
The SEC’s investigation is centered on whether Musk engaged in securities fraud as he sold Tesla shares while simultaneously increasing his stake in Twitter prior to his eventual leveraged buyout of the social media platform. Critics have raised concerns that Musk’s actions may have affected other shareholders’ decisions and market activity related to Twitter’s stock price.
A source familiar with the matter, who requested anonymity, told CNBC that while the SEC had indeed issued a settlement offer to Musk, the deadline for a response was not strictly limited to 48 hours. If a settlement is not reached, formal charges are not necessarily imminent. Typically, the SEC issues a Wells Notice before recommending charges to its commissioners, who then decide whether to proceed with an enforcement action.
Musk took to X, the social media platform he now owns, to comment on the SEC’s actions. He posted, “Oh Gary, how could you do this to me?” along with a tearful face emoji and a copy of Spiro’s letter. In a separate post, Musk shared an AI-generated image depicting SEC Chair Gensler as a snail-like creature in a suit, accompanied by the caption:
“Asked @Grok to draw a picture of @GaryGensler. Very flattering, I think!”
In his letter to Gensler, Spiro accused the SEC of a six-year campaign of “harassment” against Musk. He highlighted the SEC’s recent decision to reopen an investigation into Neuralink, Musk’s brain-implant technology venture, as an example of overreach. Spiro also claimed that SEC officials had subpoenaed him personally but stated that he refused to comply. The letter questioned whether the SEC’s latest actions were politically motivated, referencing potential influence from the White House.
This is not the first time Musk has faced scrutiny from the SEC. In 2018, the agency charged Musk with civil securities fraud after he tweeted that he was considering taking Tesla private at $420 per share, claiming that he had “funding secured.” No such deal materialized, and Musk and Tesla each paid $20 million in fines as part of a settlement with the SEC. As part of the agreement, Musk also temporarily relinquished his position as chairman of Tesla’s board. Since that time, Musk has been openly critical of the SEC, frequently referring to it as the “Shortseller Enrichment Commission.”
Musk’s dealings related to Twitter have also drawn legal action from the Oklahoma Firefighters Pension and Retirement System. The pension fund filed a lawsuit accusing Musk of failing to properly disclose his growing stake in Twitter and his intentions to acquire the company. The fund’s legal team argued that Musk’s actions misled other shareholders, giving him an unfair advantage.
Musk’s growing influence in politics and his support of certain political figures have further complicated his relationship with regulators. In recent years, Musk has become a significant donor to Republican causes and played a role in supporting the presidential campaign of Donald Trump, who was recently re-elected as President. Following Trump’s election win, Gensler announced his intention to resign from his position as SEC chair. Trump had previously vowed to remove Gensler if elected.
If the SEC and Musk fail to reach a settlement, the next procedural step would likely involve the issuance of a Wells Notice, a formal letter notifying Musk of potential charges. The notice would grant him an opportunity to respond before the SEC’s commissioners decide on potential enforcement action.
