Elon Musk ignored multiple warnings about U.S. securities disclosure obligations related to his increasing stake in Twitter in 2022, according to a Morgan Stanley executive who assisted Musk in secretly acquiring shares in the social media company, a lawsuit alleges.
The lawsuit claims Musk and his associate, Jared Birchall, were aware of and discussed the rule requiring disclosure of a stake exceeding 5% in Twitter, citing testimonies from both men during an investigation by the U.S. Securities and Exchange Commission (SEC), NDTV Reports
An amended lawsuit filed by a Twitter investor on Tuesday in a Manhattan federal court accuses Musk of defrauding investors by delaying the disclosure of his Twitter stake to purchase shares at lower prices.
The Oklahoma Firefighters Pension Fund claims Musk saved over $200 million by secretly increasing his Twitter stake, to the detriment of other investors.
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According to the lawsuit, Musk and Birchall enlisted an unnamed Morgan Stanley managing director to devise a covert trading strategy to conceal Musk’s stock acquisition, allowing him to buy shares at “artificially depressed prices.”
Neither Musk nor Birchall were immediately available for comment. Morgan Stanley issued a statement clarifying, “Morgan Stanley is not a defendant in this lawsuit.”
The Morgan Stanley executive reportedly advised Birchall multiple times to seek legal counsel regarding the 5% disclosure requirement. Birchall allegedly told the executive that lawyers had been consulted, which was untrue until Musk had amassed over a 9% stake in Twitter by April 1, 2022, according to the lawsuit.
Musk eventually purchased Twitter for $44 billion in October 2022 and rebranded the company as X.
Musk and the top U.S. market regulator have been entangled in a prolonged feud since 2018, when he tweeted that he had “funding secured” to take Tesla, the electric car manufacturer, private.