Musk Held Liable to Twitter Shareholders in Fraud Lawsuit Over $44 Billion Acquisition Deal

On Friday, a U.S. federal jury found Elon Musk liable for attempting to manipulate Twitter’s stock price in order to renegotiate or back out of a $44 billion acquisition plan in 2022, thereby deceiving Twitter shareholders.

The world’s richest man was accused of falsely claiming on social media that Twitter underreported the number of fake and spam accounts, known as bots, on its platform. The jury in San Francisco federal court made this ruling in the high-profile civil trial.

The damages have not yet been calculated, but shareholder attorney Francis Bottini estimates the total loss could be around $2.5 billion.

“Bottini stated: ‘Musk’s status as the world’s richest man is not a free pass. If you can sway the market with your tweets, you must be responsible for the harm caused to investors.’”

Lawyers from Quinn Emanuel Urquhart & Sullivan described the verdict as “a bump in the road” and said, “We look forward to overturning it on appeal.”

The civil trial began on March 2, with jurors starting deliberations on Tuesday.

Musk often chooses to litigate against shareholders rather than settle.

This includes the 2023 trial in San Francisco over whether he defrauded Tesla shareholders after claiming in 2018 that he had “secured funding” to privatize the company, which led to losses for some shareholders; and a lawsuit in Delaware over his $139 billion Tesla compensation package. Musk won both cases.

Musk ultimately completed the Twitter acquisition in October 2022 and rebranded it as X.

Musk is responsible for two statements

Twitter shareholders questioned three statements Musk made shortly after agreeing to acquire Twitter in April 2022, in which Musk questioned whether the company had a large number of bots.

The jury found Musk responsible for two of these statements.

One said that the acquisition was “temporarily on hold” until the proportion of bots was confirmed to be below 5%. Another stated that the bot percentage could be “far” above 20%, and unless Twitter’s CEO proved the bot rate was below 5%, the deal could not proceed.

Jurors also said shareholders failed to prove that Musk engaged in fraud in another allegation.

Musk’s lawyer, Michael Lifrak, countered that the billionaire’s concerns about bots were genuine, and raising the issue did not indicate he committed or intended to commit fraud.

This lawsuit involves investors who claimed to have sold Twitter stock between May 13 and October 4, 2022, at artificially suppressed prices caused by Musk.

Additionally, Musk is negotiating a settlement with the U.S. Securities and Exchange Commission over a civil lawsuit accusing him of delaying disclosure of his initial Twitter stock purchases, allowing him to buy more shares at lower prices before investors could see what he was doing.

In February this year, Musk’s rocket and space exploration company SpaceX acquired his artificial intelligence company xAI, which owns X. This acquisition made it the world’s most valuable private company at the time, valued at approximately $1.25 trillion.