Elon Musk recently put his money where his Tweets are by announcing that Tesla had bought $1.5 billion of Bitcoin. After a succession of tweets focusing on Bitcoin over the past few months, including putting BTC in his bio, Musk shocked even Wall Street with his substantial bet - which shortly after caused the price to soar to its new all-time-high of some $51,000 per bitcoin and counting.
With his Tweets and actions significantly boosting the price, lawyers have now warned the billionaire that he may face questions from the U.S. Securities and Exchange Commission (SEC) over the “facts and circumstances” of his company’s significant Bitcoin purchase. Namely, there is no proof as to when Musk had purchased the Bitcoin, or whether or not he was pumping the cryptocurrency after the fact to boost the profit of his holdings. Doug Davison, a Partner at Linklaters and former branch chief of the SEC’s division of enforcement shared with the Telegraph that, indeed, the SEC’s focus will most likely hone in on when the Bitcoin purchase was made.
It is without a doubt that Musk’s notorious Twitter behavior sheds a grey area on fair investing when the billionaire wields such influential clout when it comes to affecting stock prices. This is best proved with his proclivity to pump “joke” and “meme” cryptocurrency Dogecoin, which immediately climbed to all-time-highs when Musk began posting Dogecoin-related Tweets, memes, and polls out of the blue. Its price fell back not long thereafter, pointing out the danger in creating such volatility within a space where retail-traders tend to flock.
This is not Musk’s first Twitter-related brush with the SEC either. This second round of fire comes after Musk was already sued in 2018 by the SEC for tweeting the misleading “funding secured” to his followers which instantly drove up Tesla’s share price. While the mainstream cross-over of investing and social media is not necessarily new, there is a danger posed with business leaders of Musk’s influence callously sharing information that can manipulate the price of stock or cryptocurrency, which is a space that currently lacks regulation. However, Musk is not the only one. As far as Bitcoin is concerned, there are many entrepreneurs, including Michael Saylor and the Winklevoss brothers, who are known for pumping the cryptocurrency.
While the ethics around business leaders intentionally influencing the price of cryptocurrency via social media is uncharted territory, it is an area that may soon attract regulation. If governments don’t jump to regulate the massive increases on Bitcoin price as a hedge against fiat currency to regain monetary control, they will need to protect the inexperienced traders who may fall prey to misguided tweets leading them astray.
