A federal court located in the city of São Francisco handed down an unfavorable decision to the businessman who owns the car manufacturer Tesla and the aerospace company SpaceX. Jurors found the executive guilty of issuing fraudulent statements related to the presence of automated accounts during the acquisition process of the social media platform, which took place throughout 2022.
The judicial decision directly holds the billionaire responsible for misleading a group of investors who sold their shares between the months of May and October of that specific year. The process demonstrated that publications made on the social network artificially depressed the market value of the technology company’s shares.
Despite the conviction in two specific posts that constituted a violation of securities laws, the jury chose to acquit the businessman of the charge of participating in a broader and coordinated scheme to defraud the company’s shareholders.
Context of posts and financial impact
The civil trial focused its attention on three public statements made shortly after the signing of the initial purchase agreement, valued at forty-four billion dollars, in April 2022. Jury members found the executive culpable in relation to two of these digital statements.
The first condemned post categorically stated that the platform acquisition was temporarily suspended. The text demanded official confirmation that bots and spam accounts represented less than five percent of total monetizable daily active users.
The second message suggested to followers and the market that the real percentage of inauthentic accounts could be much higher than twenty percent. The publication indicated that the business would not continue without contrary evidence presented by the company’s then executive director.
These messages were sent during a period of extreme volatility in the global financial market, at a time when the price of shares in the technology sector was already showing a downward trend. The attitude generated immediate uncertainty about the completion of the merger.
Arguments presented by the defense in court
The legal team responsible for the defense maintained throughout the hearings that the buyer’s concerns about the proliferation of robots were completely legitimate and well-founded. The lawyers argued that there was no hidden intention to cause financial harm to investors or to manipulate stock exchange indicators to obtain advantages in a price renegotiation before the board of directors.
Defenders emphasized that the businessman faced constant resistance from the former administration of the social network to obtain raw and accurate data on the real extent of spam. The defense strategy attempted to demonstrate that the posts merely reflected the frustration of a buyer who demanded transparency in the numbers on which the multibillion-dollar transaction and the future of the communication platform were based.
Details of the platform’s billion-dollar trading
The acquisition of the technology company has been marked by twists and turns since the announcement of the purchase of the first equity stake in early 2022. The definitive agreement worth forty-four billion dollars was signed, but weeks later the buyer tried to terminate the legal contract.
The withdrawal attempt resulted in a lawsuit at Corte of Chancelaria of Delaware, where the former management demanded forced compliance with the merger agreement. Diante from the imminent defeat in state court, the deal was finally completed in October 2022.
After the purchase was completed, the company was delisted, delisting from the stock market at Nova York, and subsequently went through a brand change process, adopting a new visual identity and a new corporate name.
Calculation of losses and compensation to shareholders
The current phase of the legal process has not yet quantified the exact amount of damages that will have to be paid to injured investors. The financial determination will occur at a later stage of the litigation, through analysis by accounting and financial experts.
The shareholders’ legal representatives presented initial estimates that point to losses in the billions of dollars. The calculation is based on the difference between the value at which the shares were sold during the period of uncertainty and the value they would have had if the statements had not been published.
History of legal disputes of the businessman
The current verdict represents an atypical defeat in the executive’s trajectory, which has a history of victories in complex legal disputes involving shareholders and market laws. In previous years, he has successfully defended himself against fraud charges related to a 2018 post about his electric vehicle maker taking private, as well as winning litigation over his acquisition of a solar energy company and his corporate compensation package. The decision in
Financial market reaction after the verdict
Capital market experts see the decision as an important regulatory milestone for corporate communication in the digital era. The result reinforces the premise that securities laws fully apply to statements made on online platforms.
The conviction signals to the boards of directors of publicly traded companies the need to establish stricter controls over the public statements of their main executives, avoiding exposure to billion-dollar legal liabilities.
Changes to social network content moderation
Since taking definitive control of the operation, the new management has implemented profound changes to moderation policies and the user verification structure. The fight against inauthentic accounts, which motivated the litigation, became the justification for charging monthly subscriptions and for reformulating the authenticity seal system.
Parallel investigations by regulatory bodies
The civil jury’s decision does not end the businessman’s legal problems related to this specific acquisition. Existe a separate investigative process conducted by Comissão from Valores Mobiliários from Estados Unidos in progress.
The federal regulatory body is investigating the delay in public disclosure of the platform’s initial share purchase in the first quarter of 2022. The legislation requires investors to notify the market when they exceed the five percent stake in a publicly traded company.
The failure to report the acquisition within the legal deadline allowed the purchase of additional shares to be made at lower prices, before the market became aware of the billionaire’s interest, generating questions about undue advantages.
The role of automated accounts in digital engagement
The presence of robots and fake accounts directly affects the business model of platforms based on digital advertising. Advertisers demand precise metrics on the reach of their campaigns, and the artificial inflation of the number of users compromises the effectiveness of marketing investments, generating distrust between advertising agencies and the global brands that finance the network’s operation.
The dispute over the exact percentage of spam revealed the technical difficulty of auditing databases with hundreds of millions of daily hits. The lack of consensus on the methodology for counting these inauthentic accounts was the main point of friction between the former management and the current owner during the months leading up to the completion of the purchase, resulting in the current legal battle.
Next steps in the process and appeal phase
Defense lawyers have already classified the outcome of the trial as a temporary obstacle and confirmed their intention to appeal the decision to higher courts. The appeal strategy will seek to overturn the verdict based on alleged procedural errors during the presentation of evidence.
While the appeal is being processed through the court system, investors are awaiting the scheduling of hearings that will define the exact amount of compensation. The case will continue to proceed in federal court, requiring new rounds of technical testimony and detailed financial analysis.