Elon Musk faces a challenging scenario in his attempt to contest the U.S. Securities and Exchange Commission (SEC).
On Oct. 5, the SEC announced legal action that aims to force Musk to comply with a subpoena and provide testimony regarding his acquisition of Twitter (now X). Musk received that subpoena in May and attempted to avoid the order. He submitted an objection just days before a September hearing date that he did not attend.
Though it is unclear whether Musk intends to resist the SEC’s demands, experts have now suggested that any legal challenge is unlikely to succeed.
Stephen Crimmins, a partner at Davis Wright Tremaine, told Reuters:
“This case is different from past forays between the SEC and Elon Musk because it’s a subpoena enforcement case. These cases are really cut and dry … The law provides the SEC has subpoena power to take investigative testimony and gather documents.”
Other lawyers also commented on the case. Howard Fischer of Moses & Singer noted that the SEC only needs to show that the subpoena is part of its legitimate attempts to obtain testimony in order to compel to Musk to testify. Meanwhile, Mukasey Frenchman partner Robert Frenchman opined: “I don’t think it’s likely [that Musk] wins this battle.”
Lawyers also told Reuters that Musk will likely be fined until he agrees to testify, though he could face a jail sentence in extreme circumstances.
Each of the above commentators has past experience in related matters. Crimmins and Fischer have both formerly served as SEC lawyers, while Frenchman has defended clients in cases initiated by the securities agency.
Musk’s case is of interest to crypto community
The SEC’s current and past lawsuits against Musk do not concern cryptocurrency. However, the current case should be of interest to the crypto community because it has recently pushed for resistance to the securities agency’s regulatory overreach.
Musk himself has now called for an overhaul of the SEC, joining other individuals who have challenged the agency including House Republican Tom Emmer and one of the SEC’s own commissioners, Hester Peirce. Several crypto companies including Coinbase, Ripple, and Grayscale have recently fought the SEC as well.
Tangentially, Musk faces a class action suit concerning his promotion of Dogecoin (DOGE). Though the SEC did not initiate this case, it in part alleges securities fraud.
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