Elon Musk was ordered by a US judge to face most of a lawsuit claiming he defrauded former Twitter shareholders. (File)
| Photo Credit: AP

Elon Musk was ordered by a US judge to face most of a lawsuit claiming he defrauded former Twitter shareholders last year by waiting too long to disclose that he had invested in the social media company, which he later bought and renamed X.

In a decision made public on Monday, US District Judge Andrew Carter said shareholders in the proposed class action could try to prove that Musk intended to defraud them by waiting 11 days past a US Securities and Exchange Commission deadline to reveal he had bought 5% of Twitter’s shares.

The judge in Manhattan also dismissed an insider trading claim against Musk, the world’s richest person. Lawyers for Musk did not immediately respond on Tuesday to requests for comment.

Shareholders led by an Oklahoma firefighters pension fund said Musk saved more than $200 million by adding to his Twitter stake, and quietly talking with its executives about his plans, before finally disclosing a 9.2% stake in April 2022.

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The shareholders also said they sold Twitter shares at artificially low prices because Musk hid what he was doing. Musk’s lawyers argued that their client was “one of the busiest people on the planet,” and that any disclosure failure was “inadvertent.”

Carter said he could not infer that Musk was “too busy” to comply with SEC rules if he could find time to buy Twitter shares, meet with company executives, and post online about Twitter.

He also found evidence that Musk understood the 5% disclosure rule, including that he had testified about it under oath, and had properly disclosed stakes in his electric car maker Tesla and the former SolarCity at least 20 times.

Katie Sinderson, a lawyer for the plaintiffs, declined to comment. Musk bought Twitter for $44 billion last October. Under the SEC rule, investors have 10 days to disclose when they have acquired 5% of a company.

Twitter shares rose 27% on April 4, 2022, to $49.97 from $39.31, after Musk revealed his 9.2% stake. Musk’s takeover valued Twitter at $54.20 per share.

The case is Oklahoma Firefighters Pension and Retirement System v. Musk et al, US District Court, Southern District of New York, No. 22-03026.

Musk has disbanded the Trust and Safety Council. (File)
| Photo Credit: AP

Elon Musk’s social media platform formerly known as Twitter has sued the state of California over a law requiring social media companies to publish their policies for removing offending material such as hate speech, misinformation and harassment.

The first-of-its-kind legislation was signed into law a year ago by California Gov. Gavin Newsom. In a lawsuit filed Friday against state Attorney General Robert Bonta, X Corp. challenges the “constitutionality and legal validity” of the law, saying it violates the First Amendment.

The California law requires social media platforms to post their content moderation policies — which they already do — and twice a year submit a report to the state on how they address hate speech, racism, misinformation, foreign political interference and other issues.

The law, “compels companies to engage in speech against their will, impermissibly interferes with the constitutionally-protected editorial judgments of companies such as X Corp.” and has pressures companies to remove or demonetize “constitutionally-protected speech,” says the lawsuit, filed in federal court in California.

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Since taking over Twitter in October 2022, Musk has upended the platform’s content moderation system, laying off workers responsible for weeding out problematic content and reinstating accounts banned for engaging in hate speech, promoting Nazi and white nationalist material and harassing users.

Musk also disbanded a key advisory group, the Trust and Safety Council, made up of dozens of independent civil, human rights and other organizations. The company formed the council in 2016 to address hate speech, harassment, child exploitation, suicide, self-harm and other problems on the platform. He has referred to himself as a “free speech absolutist” — though the billionaire has at times proven sensitive about critical speech directed at him or his companies. Last year, he suspended the accounts of several journalists who covered his takeover of Twitter.

The law’s author, Democratic Assemblyman Jesse Gabriel, said it is a “a pure transparency measure that simply requires companies to be upfront about if and how they are moderating content. It in no way requires any specific content moderation policies – which is why it passed with strong, bipartisan support.”

“If Twitter has nothing to hide, then they should have no objection to this bill,” he added.

The attorney general’s office said it will review the complaint and respond in court.

Representatives for X did not immediately respond to messages for comment on Friday.