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US agency to investigate X’s acquisition, force Musk to testify

The US Securities and Exchange Commission (SEC) is seeking to force Elon Musk to testify as part of its investigation into his purchases of Twitter Inc. shares before his takeover of the social media platform, now known as X.

The SEC accused Musk of failing to appear for testimony when requested and has asked a judge to force him to testify. The agency is scrutinizing Musk’s statements and disclosures regarding the stock transactions.

ACCORDING TO THE AGENCY’S FILING, the SEC initiated its probe in April 2022 and requested thousands of documents from Musk and other parties. Musk has already provided hundreds of documents and testified twice in July 2022, as described in the filing, which portrays an ongoing, nonpublic investigation.

In response to these developments, Alex Spiro, an attorney for Musk, stated, “The SEC has already taken Mr. Musk’s testimony multiple times in this misguided investigation – enough is enough.”

While Musk initially agreed to an interview with the SEC last month, he later raised objections, including concerns about the interview location in San Francisco. The SEC proposed new dates and a change of location to Fort Worth, Texas, near Musk’s current residence, but Musk subsequently refused to meet for the interview, as detailed in the filing.

The SEC’s move to enforce a subpoena is relatively rare, but the courts often side with the regulator when it occurs. Marc Fagel, a lecturer at Stanford Law School and a former SEC official in San Francisco, noted the significance of the SEC making the investigation public.

Before fully acquiring X, Musk purchased a 9.2 percent stake in the social media company in March 2022 and disclosed it to the SEC in April. The SEC’s regulations mandate that individuals who acquire more than 5 percent of a public company must disclose it within ten days.

As Musk increased his holdings in X, the SEC sent him a query in April 2022 regarding how he disclosed his substantial stake. The SEC’s inquiry, which came from the mergers and acquisitions office, focused on the form investors must file when accumulating more than 5 percent of a company.

Elon Musk, the world’s richest person, oversees multiple companies, including Tesla Inc., X Corp., and SpaceX, a principal government contractor. Over the years, he has been involved in several conflicts with the securities regulator, which he once called the “Shortseller Enrichment Commission” in 2018.

In the same year, he agreed to pay a $20 million fine, relinquished his chairmanship at Tesla, and committed to clearing future tweets about the company with an internal monitor following an SEC investigation into his comments about taking the company private.

The SEC has also investigated Musk’s role in shaping Tesla Inc.’s claims about self-driving cars. According to Bloomberg News reports, SEC officials are assessing whether Musk may have inappropriately made forward-looking statements in this regard.

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