French authorities accused Elon Musk of inflating the prices of X and xAI, claiming that deepfakes with explicit images were used.

Paris prosecutors forwarded materials to the United States about possible manipulation of X and xAI shares

*Short summary:*

In early 2025, the French prosecutor’s office launched an investigation against social network X, focusing on recommendation algorithms and the emergence of deepfakes created by the chatbot Grok. The collected evidence was sent to the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ). Prosecutors suspect that the scandal surrounding deepfakes, a sharp rise in downloads of the Grok app, and Elon Musk’s posts could have been used to artificially inflate the value of X and xAI before the planned IPO of the new entity in June 2026.

What happened?
Stage Action Key facts Investigation of X Beginning in early 2025 Focus on algorithmic bias and deepfakes from Grok, including sexualized images of minors Musk’s posts Peak scandal Musk posted messages with emojis expressing delight at the “undressing” of people, and shared an image of a chatbot in a bikini. He made about 20 posts about Grok’s leadership in app downloads Growth in downloads January 1–19 2026 According to Sensor Tower, the daily average increased by 72 % compared to December 2025, and the app entered the top‑10 free services on the Apple App Store Stock manipulation Previous Musk case (2018) In August 2018 Tesla’s stock rose more than 6 % after a statement about a possible delisting and share buyback. Musk and the company paid $40 million to complete the investigation Current negotiations Regarding the Twitter acquisition (2022) Axios reports that Musk did not disclose the purchase of X shares in time for the public offering, allowing them to be bought at an artificially low price. The issue is being resolved before the IPO

Why it matters?
1. Potential impact on IPO price – a growing user base and attention to Grok could raise the valuation of X and xAI before going public.

2. Ethical risks – mass production of deepfakes, including images of minors, threatens the company’s reputation and raises questions about compliance with data protection laws.

3. History of manipulation – past cases involving Musk’s stock dealings at Tesla and Twitter show a pattern that could repeat.

How regulators are responding?
* The SEC and DOJ received materials from the French prosecutor’s office and are now reviewing them in the context of potential securities law violations.

* French prosecutors stated that public data suggests deliberate use of the scandal to artificially boost the company’s valuation.

Conclusion
The Grok deepfake scandal, sharp rise in downloads, and provocative posts by Elon Musk may be linked to an attempt to raise the value of X and xAI before the IPO. French authorities have already forwarded evidence to U.S. regulators, and Musk’s history of stock manipulation raises concerns about possible repeat actions.