Former Twitter shareholders are suing Tesla founder Elon Musk.

In a class action lawsuit filed in federal court in Manhattan, shareholders allege that Musk made "false and misleading statements and omissions."

The Tesla founder failed to disclose until March 24 that he had invested in Twitter.

In doing so, he acted against the provisions of the US Securities Act.

The lawsuit seeks unspecified damages.

As shareholders say, the delayed disclosure has allowed Musk to buy more Twitter stock at lower prices while enticing shareholders to sell at "artificially inflated" prices.

Also purchased cheaply

Strict regulations actually apply when holdings in US companies exceed the five percent threshold.

On April 4, Musk announced in a mandatory notification to the SEC that he held a good nine percent stake in Twitter.

This news caused the share price to rise sharply.

But according to the lawsuit, Musk's stake was already over five percent in mid-March - without being reported within ten days by the deadline.

As a result, Musk was able to continue buying cheap Twitter shares until the April 4 announcement.

Investors who sold during this period were disadvantaged.