Days before Republicans assumed control of the U.S. Securities and Exchange Commission, the agency's five commissioners held a closed-door vote on whether to sue Elon Musk. Since 2022, the SEC had been investigating whether Musk, a close ally of incoming President Donald Trump, violated securities laws by purchasing shares of Twitter, now known as X, prior to acquiring the company.
Sources indicated that four of the five commissioners, including Republican Hester Peirce, voted in favor of the lawsuit, while Republican Mark Uyeda, the acting head of the SEC, voted against it. Following the 4-1 vote, the SEC filed a lawsuit against Musk on January 14.
For the first time, details of the vote, including Uyeda's dissent, have emerged. In the days leading up to the vote, Uyeda urged enforcement staff to sign pledges asserting that the case was not politically motivated. This request was declined, as signing such pledges is not standard SEC practice.
Sources reported that Uyeda and Peirce objected to the SEC's demand that Musk reimburse $150 million for alleged unjust enrichment, along with a penalty. However, Peirce ultimately joined the three Democratic commissioners in voting to proceed with the lawsuit.
An SEC spokesperson did not comment on the vote or the Musk case, and the agency denied a public records request for the voting record. Peirce, Musk, his lawyer, and the White House did not respond to inquiries.
Under U.S. law, investors accumulating more than 5% of a company's outstanding shares must disclose that holding within ten days. Musk's disclosure in April 2022 caused Twitter's share price to spike. The SEC stated that Musk’s disclosure came 21 days after his purchase, allowing him to acquire more shares at lower prices and ultimately saving $150 million on his Twitter acquisition.
Investigators also examined whether they could demonstrate intent behind Musk's late filing, potentially leading to more severe charges. Musk has maintained that no charges related to intent were ultimately brought.
The extensive investigation was prolonged by delays caused by Musk, who agreed to two depositions in 2022 but later sought to postpone them, prompting the SEC to request a court order to compel his additional testimony. After a year-long standoff, he appeared for questioning on October 3, 2024, but this timing ensured the matter could not be resolved before the election.
In December, a month prior to filing the lawsuit, the SEC attempted to reach a settlement. Musk shared a copy of his lawyer's response on X, revealing that the agency had given him 48 hours to agree to pay a penalty to settle the investigation or face civil charges. The two parties ultimately did not reach a settlement.
Legal experts have raised concerns about the SEC's timing in bringing a late filing case. Howard Fischer, a partner at Moses & Singer who worked at the SEC under both President Barack Obama and President Trump, noted that bringing the case closer to the conduct in question would have been more credible. Others argued that not pursuing the case at all could lead to perceptions of selective enforcement.
While acknowledging that the violation may not be severe, they emphasized that failing to act would damage the SEC's reputation as an independent agency committed to fair enforcement. Musk, who has been in conflict with the SEC since 2018, faces a summons response deadline of April 4.
Trump previously issued an executive order accusing the SEC and other agencies of politically motivated investigations under President Joe Biden, directing a review of cases from the previous four years. The SEC spokesperson declined to comment on this review.