A federal judge has ruled that a class-action lawsuit against Elon Musk and his family office, Excession, may proceed in court, rejecting Musk’s attempt to dismiss the case. The legal challenge, Rasella v. Musk (Case No. 1:22-cv-03026-ALC-GWG), was filed in the Southern District of New York.
The lawsuit, brought by former shareholders of Twitter (now rebranded as X), alleges that Musk concealed his acquisition of shares in the social media platform, leading to financial losses for investors who sold their holdings at “artificially deflated prices.”
The Oklahoma Firefighters Pension and Retirement System is among the plaintiffs, who claim Musk’s delayed disclosures artificially suppressed share prices during his stake-building phase.
Musk’s legal team argued that the delayed disclosure of his share purchases was an oversight, not intentional fraud. However, Judge Andrew L. Carter found that Musk’s failure to disclose his stake in a timely manner sent a “false pricing signal to the market.”
In his 43-page opinion, Carter highlighted a March 26, 2022 tweet where Musk suggested he was considering purchasing a different social network, despite already owning millions of Twitter shares by March 25, 2022. The judge deemed it “reasonable” to interpret this tweet as an attempt to “misdirect the public to think that buying Twitter was just a fantasy.”
Musk’s $44 billion acquisition of Twitter in 2022 followed his undisclosed stake accumulation, which the Securities and Exchange Commission (SEC) has also challenged in a separate lawsuit. The SEC alleges Musk violated disclosure rules by delaying reports of his share purchases to allow him to buy additional shares at lower prices.
On the same day the court ruling was announced, Musk revealed that his artificial intelligence venture, xAI, would merge with X in an all-stock transaction, valuing xAI at $80 billion and X at $33 billion. Musk currently serves as a senior advisor to President Donald Trump and oversees Tesla and SpaceX.
Neither Musk nor Jared Birchall, his representative, immediately commented on the ruling. The case will now proceed to further litigation, with the SEC’s parallel action ongoing.