Elon Musk Liable for Twitter Shareholder Fraud | $2.5B Penalty Possible
A San Francisco federal jury found Elon Musk liable for defrauding Twitter shareholders by attempting to depress the company’s stock price ahead of his $44 billion acquisition, according to a verdict delivered Friday. The jury concluded that Musk falsely claimed Twitter significantly underestimated the number of automated bot accounts on its platform.
The lawsuit, brought by Twitter shareholders, alleged that Musk’s public statements about the prevalence of bots were designed to create a pretext for abandoning or renegotiating the deal. Jurors found Musk liable regarding two specific statements he made in May 2022. One stated the acquisition was “temporarily on hold” pending verification that bots comprised less than 5% of Twitter’s user base. The other asserted the bot percentage could be “much” higher than 20%, rendering the deal untenable without confirmation from Twitter’s then-CEO.
“Musk’s status as the world’s richest man is not a free pass,” stated attorney Francis Bottini, representing the shareholders. “If you’re able to move markets with your tweets you’re responsible for the harm you cause to investors.” The potential damages are estimated at approximately $2.5 billion, though the final amount remains to be determined.
Musk’s legal team, from Quinn Emanuel Urquhart &. Sullivan, characterized the verdict as a temporary setback, stating they “look forward to vindication on appeal.”
The trial commenced on March 2nd, with jurors beginning deliberations on Tuesday. This case marks the latest in a series of legal battles for Musk involving shareholder claims. In 2023, he prevailed in a similar case in San Francisco concerning allegations of fraud related to Tesla shareholders and a proposed take-private deal. He also won a case in Delaware regarding his $139 billion Tesla pay package.
Musk ultimately completed the acquisition of Twitter in October 2022, subsequently rebranding it as X. The lawsuit focused on investor claims of selling Twitter shares at artificially lowered prices between May 13 and October 4, 2022, due to Musk’s statements.
The jury did not locate Musk liable on all claims, specifically rejecting the assertion that he engaged in a broader scheme to defraud shareholders. Michael Lifrak, representing Musk, argued that his concerns about the number of bot accounts were genuine and that voicing those concerns did not constitute fraudulent intent.
Separately, Musk is currently engaged in settlement discussions with the U.S. Securities and Exchange Commission (SEC) regarding accusations of delaying the disclosure of his initial Twitter stock purchases in 2022. The SEC alleges this delay was intended to allow him to acquire more shares at lower prices before investors reacted to his involvement.
In February, SpaceX, Musk’s rocket and space exploration company, acquired xAI, his artificial intelligence firm, creating a private company valued at approximately $1.25 trillion at the time.