Judge Rejects Musk’s Bid to Overturn Twitter Investor Fraud Verdict

A US federal judge has rejected Elon Musk’s bid to overturn a jury verdict that found the billionaire defrauded Twitter investors by attempting to drive down the social media company’s share price after agreeing to its $44 billion takeover.

US District Judge Charles Breyer in San Francisco on Monday also denied Musk’s request to decertify the class of investors and granted the investors’ motion for prejudgment interest. However, the judge ruled that Musk was not liable for one of the tweets challenged in the lawsuit.

“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,” Judge Breyer wrote.

Investors alleged that Musk falsely claimed Twitter was overrun by fake and spam accounts, commonly known as bots, in an effort to renegotiate the acquisition price or abandon the deal altogether. They argued that his statements depressed Twitter’s share price, causing losses to shareholders who sold their holdings.

Following the jury’s March 20 verdict, the investors’ legal team estimated that Musk could face damages of up to $2.6 billion.

Musk eventually completed the acquisition of Twitter in October 2022, later rebranding the platform as X. It now operates under his aerospace company, SpaceX.

Lawyers representing Musk did not immediately respond to requests for comment.

Mark Molumphy, counsel for the investors, described the ruling as “a very good day” for public market investors, saying the jury had rejected Musk’s attempt to “game that system”.

Musk has frequently opted to contest shareholder lawsuits rather than settle them. He is also facing a separate lawsuit in Manhattan alleging that he defrauded Twitter investors by delaying disclosure of his initial stake in the company, allowing him to purchase shares at artificially low prices.

Substantial Evidence of Falsity

The jury found Musk liable over tweets posted on May 13 and May 17, 2022, less than a month after he agreed to buy Twitter.

In the first tweet, Musk said the acquisition was “temporarily on hold” pending details on whether bots accounted for fewer than 5 per cent of Twitter’s users. Investors argued that the post triggered an 18 per cent fall in the company’s share price over the following two trading days.

The second tweet claimed that the proportion of bots could exceed 20 per cent and that the acquisition “cannot move forward” until Twitter’s chief executive proved the figure was below 5 per cent.

Judge Breyer found “substantial evidence of falsity” in the May 13 tweet, concluding that “a jury could determine that Musk had a motive to get out of the existing deal and used bots as a pretext to do so”.

However, he ruled that Musk was not liable for the May 17 tweet, citing the lack of any significant market reaction to that post.

Judge Rejects '420' Juror Bias Claim

Judge Breyer also dismissed Musk’s argument that jurors had mocked him and sought to “send a message” by highlighting the figure “$4.20” in bright blue on the verdict form.

The number 420 is widely associated with cannabis culture, and Musk has repeatedly referenced it in interviews, social media posts and business ventures.

Musk’s takeover offer valued Twitter at $54.20 per share. In 2018, his tweet claiming he had “funding secured” to take Tesla private at $420 per share prompted a civil fraud lawsuit by the US Securities and Exchange Commission, which he later settled.

The judge said it “defies common sense” to conclude that the jury was biased against Musk, noting that jurors deliberated for nearly four days and ruled in his favour on several claims. He also found no evidence that the reference to 420 reflected prejudice against Musk.

“To the contrary, 420 is a reference to cannabis/marijuana,” Judge Breyer wrote. “One need only walk around San Francisco on April 20 to observe how prevalent the celebration can be.”

 

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