Musk loses challenge to Twitter investor fraud verdict

A federal judge in San Francisco rejected Elon Musk’s attempt to throw out a jury verdict that found he defrauded Twitter investors during his $44 billion takeover of the company, Reuters reported. The ruling keeps alive investor claims tied to Musk’s 2022 tweets about bots on Twitter, now known as X.

US District Judge Charles Breyer on Monday denied Musk’s request to void the verdict and also refused to decertify the investor class, according to Reuters. Breyer granted the investors’ request for prejudgment interest, while finding Musk was not liable for one of the tweets challenged in the case.

“Even if the speaker has a change of heart or a momentary regret about a transaction, such qualms do not justify lying to the investing public,” Breyer wrote, according to Reuters.

A lawyer for the investors estimated after the March 20 verdict that damages could reach about $2.6 billion, Reuters reported. Musk’s lawyers did not immediately respond to requests for comment, according to the news agency.

Mark Molumphy, a lawyer for the investors, described the ruling as “a very good day” for public-market investors after jurors rejected what he called Musk’s effort to “game that system,” Reuters reported.

Tweets about bots at center of case

Jurors found Musk liable over tweets on May 13 and May 17, 2022, in which he raised questions about fake and spam accounts on Twitter, according to Reuters. The case centered on whether those statements misled investors while Musk was under contract to buy the company.

In the May 13 tweet, Musk said the deal was “on hold” while he awaited information supporting Twitter’s claim that bots made up less than 5 percent of users, Reuters reported. In the May 17 tweet, he said bots could account for more than 20 percent of users and that the acquisition “cannot move forward” until Twitter’s chief executive proved the figure was below 5 percent.

Investors said Musk used the bot issue to pressure Twitter into renegotiating the deal or to create a path to abandon it, according to Reuters. They also said the May 13 tweet drove Twitter’s share price down 18 percent over two trading days, causing losses for investors who sold at reduced prices.

Breyer found “substantial evidence of falsity” in the May 13 tweet and said a jury could find that Musk had a motive to exit the existing agreement and used bots as a pretext, Reuters reported. The judge sided with Musk on the May 17 tweet, finding that the lack of a market reaction meant it did not cause investor losses.

Judge rejects claim over jury bias

Breyer also rejected Musk’s argument that jurors were mocking him or trying to “send a message” by highlighting “$4.20” in bright blue on the verdict form, according to Reuters. The number 420 is associated with cannabis culture, and Reuters noted that Musk has used the figure in interviews, tweets and business contexts.

Musk’s Twitter takeover valued the company at $54.20 per share, Reuters reported. His 2018 statement that he had “funding secured” to take Tesla private at $420 per share also led to a US Securities and Exchange Commission civil fraud case that Musk later settled.

Breyer wrote that it “defies common sense” to claim the jury was biased against Musk, citing nearly four days of deliberations and the jury’s decision to side with him on some claims, Reuters reported. The judge also found no evidence that 420 carried a negative association with Musk.

Musk renamed Twitter as X after the acquisition, and Reuters reported that it is now part of his rocket and satellite company SpaceX. He also faces a separate lawsuit in Manhattan accusing him of defrauding Twitter investors by waiting too long to disclose his initial stake, allegedly allowing him to buy shares cheaply and causing others to sell at low prices.

This story draws on original reporting from Al Jazeera.