Elon Musk found guilty of defrauding Twitter investors
Spam accounts, price manipulation and defrauded investors: Elon Musk suffered a hard defeat in the civil lawsuit surrounding his Twitter takeover. Jurors convicted him of securities fraud. His lawyers are preparing an appeal.
Jury finds securities fraud proven
According to a jury, Elon Musk violated securities law in connection with the $44 billion (around €38 billion) takeover of Twitter in 2022. Jurors in a federal court in San Francisco found it proven that the entrepreneur deceived investors. The ruling is a rare legal defeat for Musk, who faced a class-action lawsuit from investors. At the center of the civil case was the question of whether Musk deliberately influenced the share price of the short message service.
The plaintiffs prevailed with the argument that he had provided misleading information about the spread of spam and bot accounts on the platform in order to reduce the agreed purchase price or to get out of the deal. Like the news agency Reuters Reportedly, the jury found Musk liable on two counts. It’s about statements from May 13th and 17th, 2022. At the time, Musk said that the deal was temporarily on hold until it was proven that automated accounts made up less than five percent of the user base, and at the same time suggested a significantly higher share.
Not a comprehensive fraud plot
Musk was exonerated on other points. The jury found no liability for a statement at a technology conference or for the accusation that he had planned a systematic fraud scheme. Nevertheless, there is a risk of high claims for damages. Attorneys for the shareholders assume a volume of up to around 2.5 billion dollars (around 2.16 billion euros). A court still has to determine the specific amount. The defense argued that Musk’s concern about the number of false accounts was legitimate and not just a negotiation tactic. Musk said on the witness stand that he didn’t mean to harm Twitter. His lawyers announced that they would appeal the verdict.
Looking at previous procedures
Musk had won similar cases in the past. Jurors acquitted him of liability in a trial over his “funding secured” statements about Tesla in 2018. However, in the current Twitter case, the jury concluded that his communication on social media significantly affected investors. The Twitter takeover conflict made headlines for months in 2022.
Musk tried several times to reverse the purchase, whereupon the platform’s management at the time filed a lawsuit in Delaware to enforce compliance with the contract. Shortly before the process began, Musk gave in and completed the takeover at the originally agreed price of $54.20 (around €46.76) per share.
