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A nine-person jury in San Francisco found Elon Musk liable for defrauding investors during his 2022 Twitter acquisition, concluding that two of his public statements misled shareholders as the deal faced turmoil before closing. The jury also absolved Musk of portions of the fraud case, including a finding that he did not intentionally “scheme” to defraud investors, and it treated one challenged statement from a podcast as opinion rather than actionable misrepresentation. The verdict came after nearly four days of deliberation, roughly three weeks after the March 2 start of the civil trial in federal court for the Northern District of California.
The case centered on a class-action lawsuit that was filed just before Musk took control of Twitter, which he later renamed X. Jurors were asked to decide whether two tweets and comments Musk made on a podcast amounted to him intentionally defrauding Twitter shareholders who sold their shares based on his statements. After the jury’s decision, it said Musk was liable for misleading investors with two tweets, but it found that he did not do so with a podcast statement.
The jury awarded damages to shareholders, and plaintiffs’ lawyers said the total translated to between about $3 and $8 per stock per day. Mark Molumphy, an attorney for the plaintiffs, said the damages amounted to about $2.1 billion in stock and another $500 million in options, calling it “an important victory” for investors and for public markets. Molumphy said the verdict sent a message that “just because you’re a rich and powerful person, you still have to obey the law, and no man is above the law.”
Musk’s legal team said it would appeal and pointed to other cases in which the team said he won appellate victories. In a statement, Quinn Emanuel Urquhart & Sullivan’s legal team said the jury’s decision, which they described as both for and against the plaintiffs and including a finding of no fraud scheme, was “a bump in the road.” They said, “We view today’s verdict…as a bump in the road,” and said they “look forward to vindication on appeal.”
Much of the trial focused on Musk’s account of Twitter’s disclosures about the number of bots on the platform. Musk testified that Twitter had a much higher number of fake and spam accounts than the 5% disclosed in regulatory filings, and he used that discrepancy, according to his testimony, as part of his explanation for why he tried to retreat from the purchase. The plaintiffs argued that as Musk’s efforts to unwind the deal unfolded, his public statements were used to influence the market while he sought leverage or a renegotiation.
In their theory of the case, the plaintiffs said Musk’s communications were not inadvertent. They argued the relevant tweets—including one on May 13, 2022, that Musk said the deal was “temporarily on hold”—were carefully calculated to drive down Twitter’s stock price. They also argued that the timeline and context showed why investors sold shares during the uncertainty. When Twitter’s shares fell below $33, which the trial record described as about 40% under Musk’s original purchase price, shareholders who exited during the period at issue lost money, according to the lawsuit’s allegations.
Musk testified that he had raised concerns about how Twitter calculated its bot estimates, including in language he used to describe the board-provided materials. He maintained that Twitter’s leadership lied about the amount of bots on the platform and withheld information from him about how the number of fake accounts was calculated. He told jurors, “I did make it clear that I thought it was BS,” when discussing Twitter’s calculations that, he said, indicated only about 5% of its accounts were bots. Musk also asserted in testimony that shareholders ultimately benefited when he agreed to continue with the transaction at the original sales price.
The jury also heard that Musk attempted to back out of the deal before finally agreeing to pay what he had originally promised. After Musk tried to retreat, Twitter went to court in Delaware to force him to honor the original agreement, and a separate timeline played out shortly before that Delaware case was scheduled to go to trial. Not long before that scheduled point, Musk reversed course again and agreed to pay at the terms originally promised.
During the federal trial, jurors heard testimony from former Twitter executives, including CEO Parag Agrawal and CFO Ned Segal, as well as Musk. Musk spent more than a day on the stand, and much of the proceeding addressed whether his statements during the deal uncertainty were misleading and whether he acted with the intent the plaintiffs sought to prove. The jury ultimately concluded that Musk misled investors with two tweets, but it did not find that he did the same through the podcast statement it reviewed.
This was not the first time Musk has faced allegations in federal court over investor-related statements connected to his business deals. Three years earlier, Musk testified in a San Francisco federal trial involving allegations linked to his proposed 2018 Tesla transaction; in that case, a nine-member jury absolved him of wrongdoing. A business litigation lawyer who was not part of the Twitter case said the verdict sends a message that if someone moves the market with their words, they may face consequences, and that juries are taking such claims seriously as social media’s influence on markets grows.
In a statement at the conclusion of the case, Musk addressed the market reaction from shareholders. He said, “I can’t control whether people sell their stock,” adding that “everyone who held the stock fared extremely well.” Plaintiffs’ lawyer Mark Molumphy had urged jurors to hold Musk accountable for the thousands of investors he said lost money based on tweets that included the May 13 “on hold” language, according to the trial record.