Elon Musk lost a crucial legal battle on Friday when a federal judge in Manhattan said investors could proceed with their lawsuit accusing him of manipulating Twitter’s stock price before he bought the company in 2022.

According to a Bloomberg report, the investors claim Musk committed securities fraud by failing to disclose how much Twitter stock he had acquired, posting misleading statements about the platform’s future, and using a secret trading strategy to build his stake.

US District Judge Andrew Carter Jr. ruled that several tweets that Musk posted support the investors’ fraud claims.

One series of messages from March 2022 involved Musk polling Twitter users on whether the platform had too many fake or spam accounts. The judge found that while some of Musk’s tweets do not amount to fraud, others may have misled the market.

Musk’s attorneys had tried to get the case dismissed, calling it legally baseless and accusing the plaintiffs of exploiting public attention around Musk’s $44 billion purchase of Twitter, now renamed X.

According to the judge’s decision, Musk’s tweets and alleged delays in reporting his growing stake to the US Securities and Exchange Commission will remain central issues in court.

Elon Musk is already facing similar legal issues

The SEC had already been investigating Musk over whether he tried to gather Twitter shares at a discount by withholding the full extent of his ownership. Twitter’s stock jumped 27% once Musk disclosed his position.

While the regulator claims he possessed material nonpublic information at the time, it has not formally accused him of insider trading.

Recently, five SEC commissioners voted on whether to sue Musk. While four supported that move. Only Commissioner Mark Uyeda voted against it.

Elon Musk’s lawyer, Alex Spiro, stated that his client has “done nothing wrong” and accused the SEC of committing “ticky tak” violations.

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