Trump appointee Paul Atkins is set to face a major minefield upon taking over leadership of the SEC, given Musk’s close ties to the incoming president

Tesla Inc. Chief Executive Elon Musk is in the crosshairs of the Securities and Exchange Commission once again, putting the Trump administration in the tricky spot of determining whether to continue pursuit of the incoming president’s close ally.

With only days left in the Biden administration, the SEC sued Musk on Tuesday, alleging that he didn’t comply with requirements to notify the agency about his swelling Twitter stake in 2022 – before he went on to purchase more shares, and ultimately the entire company.

The move is a last gasp by SEC Chair Gary Gensler, who is resigning on Jan. 20 once President-elect Donald Trump takes office. It will be up to Paul Atkins, Trump’s pick to succeed Gensler, to determine how to move forward with the case, which is likely to be a thorny one given Musk’s close relationship with Trump. The incoming president has tapped Musk to lead the Department of Government Efficiency, or DOGE, a prospective new federal commission to root out wasteful spending.

Read: How Elon Musk and Vivek Ramaswamy teamed up to gut $2 trillion in government spending

According to an 11-page complaint that the SEC filed in federal court in Washington, Musk failed to submit a required report of beneficial ownership of Twitter shares with the SEC on time. As a result, the SEC complaint says, Musk was then able to purchase more Twitter shares “at artificially low prices from the unsuspecting public, who had not yet priced in the undisclosed material information of Musk’s beneficial ownership.” His stake crossed above the 5% mark on March 24, 2022, but Musk went on to buy more than $500 million in additional shares from March 25 to April 1, according to the complaint.

Musk thereby underpaid for the Twitter purchase by $150 million or more, the SEC alleges. “Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm,” the agency said in its complaint.

Musk ultimately took Twitter private in a $44-billion deal that included debt financing.

Opinion: TikTok is the last thing Elon Musk needs right now

Musk’s lawyer, Alex Spiro, called the agency’s move a “sham” and said in emailed comments that it was “an admission by the SEC that … they cannot bring an actual case.”

Spiro said the SEC had engaged in a “multiyear campaign of harassment” against Musk, adding that the latest measure is over “an alleged administrative failure to file a single form – an offense that, even if proven, carries a nominal penalty.”

Musk previously drew the ire of the SEC for tweeting in 2018 that he had the “funding secured” for a private takeover of Tesla (TSLA). Musk reached a settlement later that year with the agency, then led by Trump appointee Jay Clayton, and agreed to controls surrounding his communications. Musk is cozier with the Trump team now, having donated an estimated $200 million or more to the campaign and continuing to consult on various matters.

Opinion (from 2019): Tesla and Elon Musk are creating a credibility problem

-Emily Bary

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