Jury Holds Elon Musk Liable for Defrauding Twitter Investors in $44B Deal

A federal jury in San Francisco has determined that Elon Musk defrauded Twitter shareholders by attempting to manipulate the company's stock price during his 2022 takeover bid. The world's richest person was accused of making false claims about bot accounts to potentially renegotiate or abandon the $44 billion purchase.

SAN FRANCISCO, March 20 – A federal jury has determined that Elon Musk committed fraud against Twitter shareholders by attempting to manipulate the social media platform’s stock value during his 2022 acquisition efforts, according to Bloomberg News reporting on Friday.

The jury concluded that Musk tried to artificially lower Twitter’s share price so he could either renegotiate the terms of his $44 billion purchase agreement or withdraw from the deal entirely. The amount of financial damages will be decided at a later date.

Neither Musk’s legal team nor attorneys representing the shareholders responded immediately to requests for comment following the verdict.

The San Francisco federal court decision follows a highly publicized trial where Musk, currently the world’s wealthiest individual, faced accusations of making misleading statements about Twitter’s bot problem. Shareholders alleged he falsely claimed the platform had significantly underreported the number of fake and spam accounts operating on the service.

Despite the legal challenges, Musk proceeded with the Twitter acquisition in October 2022, subsequently rebranding the platform as X. He later integrated the company into SpaceX, his aerospace and rocket manufacturing business.

The civil proceedings started on March 2, with jury deliberations commencing this past Tuesday.

Musk has consistently chosen to fight shareholder lawsuits in court instead of reaching settlements. His legal battles have included a 2023 San Francisco trial regarding alleged fraud against Tesla investors, who claimed financial harm after his 2018 tweet falsely stating he had “funding secured” to take Tesla private. He also faced Delaware litigation concerning his $139 billion Tesla compensation package. Musk prevailed in both previous cases.

In this most recent lawsuit, Twitter shareholders took issue with Musk’s public questioning of the company’s bot disclosure on three separate occasions after signing the April 2022 purchase agreement. He suggested the platform might have 20% or more bot accounts, far exceeding Twitter’s reported 5% figure.

Shareholders pointed to several instances, including a May 17, 2022 tweet where Musk declared his acquisition “cannot go forward” until Twitter’s CEO could verify that bot accounts represented less than 5% of users.

“He trashed the company. Trashed the executives. And tanked the stock,” stated Mark Molumphy, the shareholders’ attorney, during Tuesday’s closing arguments.

Musk’s lawyer, Michael Lifrak, argued that his client’s bot concerns were legitimate and that publicly addressing these issues did not constitute fraudulent intent or behavior.

The legal action represents investors who say they sold Twitter stock at artificially reduced prices between May 13 and October 4, 2022, due to Musk’s statements.

Additionally, Musk is currently negotiating a potential settlement with the Securities and Exchange Commission regarding allegations that he delayed disclosing his initial Twitter stock purchases in 2022, allowing him to continue buying shares at lower prices before the market became aware of his investment strategy.

In February, SpaceX acquired Musk’s artificial intelligence venture xAI, which had incorporated X, creating what was then valued as the world’s most valuable private company at approximately $1.25 trillion.