Elon Musk requested a federal judge in New York to dismiss a lawsuit against him brought on by shareholders of X who accuse him of waiting too long to disclose his purchase of a large financial stake in the social media company.
However, in his request, Musk said he misunderstood the Securities and Exchange Commission’s disclosure rule, having thought it wasn’t required until the end of 2022.
“This is not a scheme to defraud,” Musk said. “All indications — including those in the pleadings — point to mistake.”
Investors in Twitter, now known as X, say Musk and his wealth manager Jared Birchall intentionally defrauded investors by waiting an additional 11 days past the March 24, 2022, deadline set by the SEC to disclose that he had bought a 5% stake in Twitter.
Under federal securities laws, Musk had 10 days to disclose his stake in Twitter, but he did not file with the SEC until three weeks later.
During this period, Musk bought more shares, and by April 4, 2022, he revealed he owned a 9.2% stake in the company. News of Musk’s ownership led share prices to rise by 27%. Musk was reportedly able to save more than $200 million in purchases from the time period in between his first initial investment to announcing his stake to the public.
Investors who had sold their shares before Musk’s disclosure said they had missed out on big gains, saying Musk and Birchall “schemed to violate Musk’s disclosure obligations so they could secretly build a massive position in Twitter at artificially low prices while deceiving investors.”
Upon realizing the error, Musk filed with the SEC the next day.
“Such prompt and corrective disclosure — within seven trading days of the purported deadline — is not the stuff of a fraudulent scheme to manipulate the market,” the filing says.