Elon Musk’s legal strategy is facing a crucial test in a class-action lawsuit concerning his delayed disclosure of Twitter stock purchases in early 2022. Musk has invoked the “advice-of-counsel” defence, asserting that he relied on legal counsel when making decisions about disclosing his stake in the social media company. This defence aims to shield him from liability by suggesting that any mistakes were made based on professional legal advice rather than intentional wrongdoing.
However, investors suing Musk argue that he cannot hide behind attorneys to avoid responsibility. They claim that Musk’s attorneys’ communications should be made public to determine whether this defence is valid or simply a tactic to dodge accountability. The plaintiffs contend that Musk misled shareholders by not promptly revealing his acquisition of a significant Twitter stake, which allegedly caused market confusion and financial harm.
The case highlights broader issues about executives’ use of legal advice as a shield in securities fraud disputes. As this defence faces judicial scrutiny, the outcome could influence how future cases approach corporate compliance and executive accountability. Musk’s legal team maintains he did not commit fraud and that any delay in disclosure was inadvertent.
The lawsuit is part of the ongoing regulatory and legal challenges Musk faces related to his purchase and management of Twitter, now rebranded as X. The viability of the “advice-of-counsel” defence will be a key point as the litigation proceeds.