Elon Musk failed to fend off an investor lawsuit claiming he manipulated the stock price of Twitter Inc. months before he bought the company in 2022 by concealing how much stock he’d acquired.
A Manhattan federal judge on Friday said investors can move forward with claims that Musk committed securities fraud by failing to make timely disclosures to the US Securities and Exchange Commission, posting “misleading tweets about Twitter’s future” and carrying out “a coordinated trading strategy to silently build up” his position in the social media company.
Lawyers for Musk and the investors didn’t immediately respond to requests for comment.
Several tweets Musk posted as he publicly questioned whether to go through with the Twitter purchase figured into the judge’s ruling. In March 2022, the billionaire polled Twitter users about whether they believed the platform had too many fake or spam accounts.
US District Judge Andrew Carter Jr. ruled that some of the tweets support fraud claims, while others don’t.
In their request to have the case thrown out, Musk’s lawyers had argued it has no legal merit and is merely an attempt to “harness the spectacle” around him and his $44 billion acquisition of the social-media platform.
Musk is facing similar allegations in a suit filed by the SEC days before Donald Trump was sworn in as president. Musk’s lawyer Alex Spiro said at the time his client has “done nothing wrong” and accused the SEC of pursuing “ticky tak” violations that ordinarily carry nominal penalties.
Musk is set for a deposition next week in yet another investor suit over his Twitter acquisition.
The case is Rasella v. Musk, 22-cv-03026, U.S. District Court, Southern District of New York .
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