Musk Loses Bid to Overturn Twitter Fraud Verdict as Judge Upholds Jury Ruling

A United States federal judge has refused to overturn a jury verdict that found Elon Musk defrauded Twitter investors by attempting to push down the social media company's stock price after he had agreed to a $44bn takeover.

US District Judge Charles Breyer, sitting in San Francisco, delivered the ruling on Monday. He also rejected Musk's request to decertify the class of investors and granted the investors' motion for prejudgment interest. The judge did, however, find Musk not liable in relation to one of the disputed tweets.

"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.

A lawyer representing the investors had estimated after the March 20 verdict that damages could reach roughly $2.6bn. Lawyers for Musk did not immediately respond to requests for comment.

Mark Molumphy, an attorney for the investors, described it as "a very good day" for those in public markets, saying jurors had "rejected Musk's effort to game that system".

The tweets at the heart of the case

Jurors found Musk liable over two posts from May 13 and May 17, 2022, in which he questioned whether Twitter was overrun by fake and spam accounts, commonly referred to as bots.

The May 13 tweet stated that the purchase was "on hold" pending details on whether bots made up less than 5 percent of users. The second tweet suggested the share of bots could be significantly higher than 20 percent, and said the deal "cannot move forward" until Twitter's chief executive proved the figure was below 5 percent.

Investors argued that Musk made the claims to pressure Twitter into renegotiating his offer or to give himself an exit. They also said the first tweet caused Twitter's share price to drop 18 percent over two trading days, producing losses when they sold at reduced prices.

Breyer found "substantial evidence of falsity" in the May 13 tweet and stated that "a jury could conclude that Musk had a motive to get out of the existing deal and used bots as a pretext to do so".

The judge agreed with Musk, however, that the absence of a market reaction to the May 17 tweet meant it did not cause investors to lose money.

The '420' dispute

Breyer also dismissed Musk's argument that jurors were "mocking" him and using the verdict 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 frequently referenced it in interviews, posts and business dealings. His Twitter takeover valued the company at $54.20 per share. In an earlier example, Musk's 2018 tweet claiming he had "funding secured" to take Tesla private at $420 per share triggered a civil fraud lawsuit from the US Securities and Exchange Commission, which he later settled.

The judge said it "defies common sense" to suggest jurors were biased against Musk, noting they had deliberated over nearly four days and sided with him on some claims. Breyer found no evidence that the number 420 carried a negative connotation toward Musk.

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

Wider legal exposure

Musk later changed Twitter's name to X, which is now part of his rocket and satellite company SpaceX. He also faces a separate lawsuit in Manhattan alleging he defrauded Twitter investors by waiting too long to disclose his initial stake, which allowed him to buy shares cheaply while others sold at low prices.

The ruling keeps a significant financial and legal challenge alive for the world's richest person. What do you think the outcome means for accountability in public markets? Share this article and join the conversation.

Source: Al Jazeera English