Elon Musk Faces SEC Lawsuit for Late Disclosure of Twitter Ownership

Musk is not very happy about the lawsuit and criticizes the SEC by calling it a "completely broken" organization. The SEC is also continuing its efforts to enforce older cases, including appealing Ripple's status of XRP securities, despite an upcoming leadership change as Gary Gensler prepares to resign. Meanwhile, the CFTC is considering reviewing Crypto.com's sports betting futures contracts. SEC Sues Elon Musk The US Securities and Exchange Commission (SEC) has filed a lawsuit against Elon Musk, alleging that the billionaire did not timely disclose his beneficial ownership of Twitter. According to the SEC, Musk began buying Twitter shares in early 2022 and crossed the 5% ownership threshold on March 14. However, he did not disclose his stake within the 10-day deadline as requested, but instead filed the report 11 days late on April 4, 2022. The SEC stated that this delay allowed Musk to continue to artificially buy Twitter shares at a low price, ultimately resulting in at least $150 million in losses for the shares purchased from March 24 to April 4, 2022. On the day Musk disclosed, Twitter's stock price had increased by over 27%. The lawsuit, filed in Washington, DC, accuses Musk of taking advantage of delays to buy shares from the public at a price that did not take into account his increasing ownership stake. The SEC argues that this deprived investors of important information and allowed Musk to save a lot of money in his total investment amount. Musk finally acquired Twitter for $44 billion on April 25, 2022, before transforming the platform into a private platform and renaming it X. He also implemented comprehensive changes, including mass layoffs and changes in content moderation policies. These changes have subjected the platform to stricter supervision by regulatory agencies in regions such as Europe and Australia. In response to the lawsuit, Musk posted on X and criticized the SEC as a "completely broken organization." He also accused the SEC of prioritizing smaller complaints over larger issues. His lawyer, Alex Spiro, described the lawsuit as a "baseless complaint" and believed it was the culmination of the SEC's alleged harassment of Musk. Spiro claimed that Musk did nothing wrong and that the lawsuit was an SEC effort to deflect from its inability to pursue more important cases. The lawsuit was filed just days before SEC Chairman Gary Gensler prepared to resign with Donald Trump taking office as president. Musk is expected to advise the new government on the effectiveness of governance, but currently faces litigation and potential penalties, including disgorgement of profits and civil fines, if found responsible. SEC Emphasizes the Ripple Case Despite an Upcoming Major Change The US SEC is still pursuing ongoing enforcement actions despite the upcoming leadership change on January 20 when Gary Gensler resigns as chairman. Ripple's General Counsel, Stuart Alderoty, confirmed in a January 14 post on X that the SEC will not delay filing an appeal against the ruling against Ripple. In August, the blockchain company was found liable for $125 million in damages in a lawsuit in which the SEC alleged that XRP was used as an unregistered security to raise capital. Alderoty criticized the SEC's action as a waste of taxpayers' money but still has confidence in Ripple's stance on the appeal and is optimistic about working with the new leadership. Ripple CEO Brad Garlinghouse agrees and hopes that the SEC's enforcement approach may change after Donald Trump's inauguration on January 20. One of the promises in Trump's campaign is to replace Gensler. The SEC chairman faces widespread criticism from the cryptocurrency industry. Trump also said he would nominate former SEC commissioner Paul Atkins as the next chairman, subject to Senate approval. The civil lawsuit against Ripple was initiated in December 2020 during the first term of Trump's administration under then SEC Chairman Jay Clayton, and is currently being appealed. The SEC is appealing a federal judge's decision that XRP is not necessarily a security, while Ripple's appeal will focus on other aspects of the ruling. It is still uncertain whether the new leadership of the SEC will continue to pursue the lawsuit against Ripple or not. Alderoty has donated over $300,000 to Political Action Committees (PACs) supporting Trump. In addition, Ripple contributed $45 million to Fairshake PAC, which has spent over $100 million supporting cryptocurrency-friendly candidates in the 2024 election cycle. Ripple has announced an additional $25 million donation to PACs for the 2026 midterm election. CFTC Reviews Crypto.com Evaluation The U.S. Commodity Futures Trading Commission (CFTC) is reportedly considering evaluating Crypto.com's futures contracts that allow users to bet on football matches, including the upcoming Super Bowl. According to Bloomberg, the CFTC's five commissioners are voting on whether to initiate a 90-day evaluation to determine if these contracts violate gambling laws. While the agency cannot immediately halt trading, they may ban these contracts after the Super Bowl on February 9th. Crypto.com operates a derivatives exchange based in the United States and has informed the CFTC on December 19 about its plan to start trading contracts on December 23. However, due to time constraints during the holiday season and concerns about government shutdown, the CFTC did not review the contracts before their launch. Contracts allow users to bet on the outcomes of college football and National Football League games, including the Super Bowl. It is limited to 2,500 contracts per user and a maximum of 250,000 contracts for market makers. Each contract is listed at $100. The potential investigation comes at a time when the CFTC is grappling with regulating event contracts, allowing betting on various outcomes, from sports to political events. These contracts have garnered attention through decentralized platforms like Polymarket. Polymarket is a decentralized prediction market platform that allows users to trade based on the outcomes of real-world events. These events can include elections, sports, or other current topics. Built on blockchain technology, it provides a marketplace where people can bet on the outcome of events using cryptocurrency. The CFTC is also appealing the court's decision regarding Kalshi, a prediction market provider, on contracts related to the 2024 US election. The regulatory agency argues that these services fall under gambling laws. A spokesperson from Crypto.com believes that the CFTC's loss in the lawsuit has provided sufficient legal clarity for event contracts. In response to assessing the potential, a Crypto.com spokesperson expressed their disappointment and also criticized the current CFTC leadership for considering action before the new administration could consider. The agency's chairman, Rostin Behnam, will resign on January 20 when Donald Trump takes office. Reports indicate that CFTC commissioner Summer Mersinger, who supports cryptocurrencies, has been favored by the agency's leadership, although no official replacement has been announced yet. DYOR! #Write2Earn #Write&Earn $BTC {spot}(BTCUSDT)