
The U.S. Securities and Exchange Commission has brought Elon Musk to court again, and this time it may win.
The agency on Thursday asked a federal court to force Musk to testify in its probe into his $44 billion takeover of Twitter, the third time the SEC has taken Musk to court.
It filed him in 2018, but again in 2019 in relation to a tweet he sent saying he had secured funding to take Tesla private. The 2018 suit was quickly settled on the condition that lawyers vet Musk's future tweets. The SEC's lawsuit in 2019 did not go their way, and the plan to enforce that deal did not go their way.
In this case, the SEC is on solid ground as the law enforcing the requirements of investigatory demands, or subpoenas, is clear cut, said several former SEC officials.
While the stakes are lower this time, the new case highlights the exceptional feud between the world's richest man and the most powerful securities regulator, which has struggled for years to bring Musk to heel.
iii s a subpoena enforcement case. These cases are really cut and dry,' said Stephen Crimmins, a partner with Davis Wright Tremaine law firm and a former SEC trial lawyer.
If Musk defies the court, he is likely to be fined until he testifies, lawyers said. In extreme circumstances, further defiance could lead to jail.
The SEC, which declined to comment, is investigating whether Musk violated securities laws in 2022 when he bought Twitter, which Musk renamed X, as well as statements and filings he made in relation to the deal.
In April 2022, the SEC opened the probe and Musk provided documents and testified via videoconference for two half-day sessions that July. The SEC later received new documents and subpoenaed Musk in May to testify again, this time at its office in San Francisco, where X is based.
Musk agreed to testify Sept. 15, but two days before, he raised'spurious objections' and said he would not appear. Musk refused to testify in Texas, where he lives, in October or November, the SEC said.
Among his oppositions, Musk said that the SEC was trying to harass him and that his counsel needed time to review potentially relevant material contained in a biography of Musk published last month.
It's not unusual for the SEC or other Federal agencies to seek additional testimony as probes evolve, lawyers said.
In 2022, a judge ordered Terraform Labs' founder to comply with a subpoena from the SEC for documents.
The agency, just months after Musk reached an agreement with the SEC to vet his Twitter messages, determined that he breached that agreement and filed a lawsuit to comply. The judge challenged the settlement's'soft' standard for assessing when a tweet was material and told both parties to put your reasonableness pants on' and work it out.
After then, the SEC was reluctant to return to the court, even though staff believed he breached the deal several times, Reuters reported last year.
The SEC has opened a third probe into Musk, who has repeatedly denigrated the agency and alleged it is harassing him. He has argued the SEC's finding that he did not have funding secured for the Tesla take-private, and has tried unsuccessfully to have a court rescind the 2018 settlement.
Although the San Francisco court is unlikely to consider Musk's bad blood with the agency, it will be focusing on whether the SEC has been reasonably accommodating of Musk's schedule and other logistical factors. The lawyers Reuters spokeswoman said the SEC appeared to have met that bar.
t want to be pushed around, said Robert Frenchman, a partner at Mukasey Frenchman, who has defended clients in the SEC.