SEC's Only Temporary Chair Who Rejects Elon Musk's Lawsuit, What's Behind It?

Mark Uyeda, a member of the Republican Party who now serves as interim head of the SEC. (photo: x @CryptoTimes_io)

JAKARTA Days before Republicans in the US took over the leadership of the US Securities and Exchange Commission (SEC) in January, five SEC commissioners held a closed vote to determine whether they would sue Elon Musk.

Since 2022, the SEC has been investigating whether Musk, a billionaire known close to US President-elect Donald Trump, has violated securities laws by lately revealing the purchase of Twitter's shares now known as X before acquiring the company in the same year.

According to three sources familiar with the matter, four of the five SEC commissioners, including Republican commissioner Hester Peirce, voted to sue Musk. However, one vote refused to come from Mark Uyeda, a Republican who is now the SEC's interim chief.

A week after the 4-1 vote, the SEC officially filed a lawsuit against Musk on January 14, 2025.

Uyeda, before the vote, urged SEC law enforcement staff handling the case to sign a statement that the case was not politically charged. However, according to two sources, SEC staff declined because it was unusual in SEC practice.

Two other sources said that Uyeda and Peirce objected to the amount of fines Musk had to pay. The SEC demanded Musk return the profit of 150 million US olars (Rp2.4 trillion) which were obtained illegally and paid additional fines. However, Peirce continued to join three Democratic commissioners in the vote to sue Musk.

SEC spokesman declined to comment on Musk's vote and case. The SEC also rejected a request for public records from Reuters regarding the results of the vote. Peirce, Musk, his lawyer, and the White House also did not respond to questions from the media.

Under US law, investors who own more than 5% of the company's shares must disclose their holdings within 10 days. Musk only revealed his holdings in April 2022, 21 days after buying Twitter shares.

As a result, Twitter's share price jumped 27% after the disclosure, so Musk could buy more stocks at a lower price, which the SEC says cost him 150 million US dollars.

Apart from the SEC, Twitter's shareholders have also sued Musk on suspicion of fraud.

In addition to the delay in disclosure, the SEC is also investigating whether there is a motive behind the delay that could lead to more serious charges. However, according to sources, Musk stated that he misunderstood the SEC's disclosure rules, and in the end the SEC did not accuse him of deliberately breaking the rules.

Musk was willing to testify twice in 2022, but then refused to be interviewed for the third time, which led the SEC to ask the court to order him to testify again. After a year-long tug-of-war, Musk finally testified on October 3, 2024. This delay caused the investigation to be unresolved before the US election.

In December 2024, a month before the SEC sued Musk, the regulator tried to reach a settlement with him. Musk leaked a letter from his lawyer, Alex Spiro, to the then SEC chairman, Gary Gensler, who indicated that the SEC gave Musk 48 hours to receive a fine or face civil charges. The deal was not reached, so the SEC continued the lawsuit.

Six legal experts questioned why the SEC took so long to file this case.

"They could have submitted it closer to the time of the incident," said Howard Fischer, partner at law firm Moses & Singer, who worked at the SEC under the leadership of Presidents Barack Obama and Donald Trump. But submitting it at the last moment made his credibility questionable.

However, some experts consider that not filing a lawsuit at all could lead to allegations that the SEC chose not to enforce the law fairly.

"This may not be the biggest offense in history, but if we care about market justice and consistent law enforcement, it would be very embarrassing for the SEC an institution known to be independent" if it looks backward in this case, said Robert Frenchman of law firm Dynamis in New York.

Musk has been at odds with the SEC since 2018, when regulators sued him for a tweet stating that he had received funding to make Tesla a private company. Since then, Musk has often criticized the SEC, even calling it a completely damaged organization.

In this case, Musk has until April 4 to respond to a court summons, according to documents filed last Thursday.

Meanwhile, President Trump issued an executive order accusing the SEC and other agencies of conducting a politically motivated investigation under Joe Biden's administration. He also ordered a review of the various cases filed in the last four years. The SEC declined to comment on this review.