Elon Musk defrauded shareholders in his 2022 on-again, off-again acquisition of Twitter, and is liable for more than $2.1 billion in damages, a jury in San Francisco federal court concluded Friday.
Following a two-week trial at the Philip Burton federal building, jurors sided with the platform’s one-time shareholders who sued Musk over claims he deliberately tanked the company’s stock in order to renegotiate, or wriggle out of, his $44 billion acquisition bid for the social media company in 2022.
The fraud, allegedly carried out over months, depressed Twitter’s share price, costing investors when they sold their shares, the class action filed on behalf of investors claimed. The verdict required unanimous agreement among the jury’s three women and five men. They deliberated for three days.
The trial featured Musk on the witness stand; an unusual detour through San Francisco City Hall, including a controversy about Mayor Daniel Lurie; and revealed a fealty to Musk that broke a longstanding relationship between two high profile Silicon Valley dealmakers.
The verdict is a reversal of fortune for Musk in San Francisco federal court, where almost exactly three years ago he defeated a similar case accusing him of securities fraud.
The damages sum, while impressive, is pocket change for Musk, the world’s richest man. Musk will likely throw every legal argument possible into his appeal of the decision, and contest the damages award.
The money is less important than the message. If the verdict stands, it establishes real consequences for Musk, and other high profile figures, if and when their social media posts move share prices. It will mark a legal precedent that may make Musk think before he posts.
“This is the first time a jury has held Elon Musk liable for what he’s tweeting out there,” Mark Molumphy, a lead trial lawyer who represented the investors, said after the verdict.
Twitter was an important San Francisco institution, “before it went away, before he took it over, stripped it, and fired all the employees,” Molumphy said, referring to Musk. “It was not a sham, it was a real company. And the way he dragged it through the mud in order to basically get a better deal was atrocious.”
Musk’s lawyers glumly trodded out of the courtroom, declining comment.
Musk personally signed a deal in April, 2022, to acquire Twitter. Before it could be finalized with shareholder approval, he apparently wanted out. He undertook a campaign to exaggerate the prevalence of fake accounts, spam, and bots on the platform in order to erode the company’s share price, shareholders in the lawsuit argued. A key piece of evidence was a May 13, 2022 tweet, in which Musk said the deal was “on hold.”
Musk and his lawyers countered that his concern about the fake accounts was genuine, and that the company deceived him, its shareholders, and the public about the depth of the problem. The most convincing witness for the shareholders was Martin Korman, a lawyer who represented Twitter in the acquisition, whose testimony connected Musk's tweets to his attempt to renegotiate the deal. In dramatic detail, Korman described how Musk threatened Twitter’s officers and board in a final attempt to get out of the Twitter acquisition.
Musk ended up buying Twitter in October 2022 after the social media company sued him in Delaware to make good on his original offer. The following year, he rebranded the company and its website X.
This story was updated March 20 at 4:20pm to add comments from plaintiffs attorney Mark Molumphy
