How Elon Musk and X found themselves in a difficult situation in one of their largest markets ?

Elon Musk has been in a dispute with a Brazilian judge for several months regarding content moderation on X.

The dispute led to more than $3 million in penalties for X and limitations on Starlink.

Starlink has agreed to adhere to a restriction on accessing X in the nation starting from Tuesday.

Elon Musk has not avoided conflicts since purchasing Twitter and changing its name to X in 2022.

Musk's content moderation strategy, justified as a defense of free speech, has faced criticism in nations such as Australia, Nigeria, Turkey, and India.

However, it has now brought him into a high-pressure confrontation with Brazilian Supreme Court Justice Alexandre de Moraes.

Brazil's legal system has clashed with technology companies such as Whatsapp and Telegram previously. However, the debate regarding moderation on X has escalated, resulting in threats of arresting X workers and limitations on other businesses owned by Musk.

On Tuesday, Starlink, Elon Musk's satellite company, agreed to comply with court rulings to prevent access to X in Brazil, which is the platform's fifth largest user base.

Professor Luca Belli from FGV Law School in Rio de Janeiro told Business Insider that he believes the situation will be resolved within a few days once investors reach out to Musk.

Musk said it may become challenging to justify how his dedication to unfettered expression is causing investors to lose millions.

Below is a chronological sequence of the global dispute:

Brazilian officials crack down on social media censorship

A few years ago, Moraes began to impose stricter limits on freedom of speech by launching an inquiry into "fake news" under former President Jair Bolsonaro's administration.

X initially consented to delete more than 100 accounts that were flagged for hate speech, misinformation, and attacks on democracy, promising to "legally dispute the directives whenever feasible."

Musk continued to express his disagreement with Justice De Moraes's position, regularly sharing his worries about the leader and labeling the justice as a dictator, while also advocating for his resignation or impeachment.

X ignores Moraes' orders

While X first agreed to adhere to the orders, Musk announced in April that he was reversing the restrictions, saying in a post on X that "principles matter more than profit."

Moreas replied that an investigation would be conducted on Musk for obstructing justice when he refused to delete the accounts. He added that Musk would be charged approximately $20,000 for each account that was reactivated on X, as reported by French publication AFP.

Justice Moreas ups the stakes

After Moreas threatened to arrest an X legal representative, Musk shut down X offices in Brazil on August 17, as stated by X's Global Affairs team.

X received a ban from Brazil on August 31 for not complying with the directive to appoint a legal representative. Moreas stated that the ban would persist until over $3 million in fines were settled and a legal representative was appointed.

Moreas also warned that anyone in the country who tried to use a VPN to access X, as suggested by Musk, could face a fine of nearly $9,000 per day.

On August 29, Starlink's accounts in the country were frozen to assist in paying X's penalties due to Musk's ownership connection, as per an Associated Press article.

The company supplies satellite internet services to more than 200,000 customers in Brazil.

Starlink stated in a post on X that the decision to hold them accountable for the fines imposed on X was unjust and unconstitutional, and they will pursue legal action.

Musk mentioned in a post on X that SpaceX and X are distinct businesses with varied shareholders and the action "unfairly penalizes other shareholders and the citizens of Brazil."

Starlink agrees to enforce the X ban

Starlink reversed its decision on Tuesday and agreed to block access to X in the country after initially refusing to do so until X's accounts were frozen.

Starlink stated in a post on X that despite the unlawful actions freezing their assets, they are following the order to restrict access to X in Brazil.

However, Starlink promised to explore all legal options to challenge the decision.

SpaceX, the parent company of Starlink, did not provide a comment in response to a request from BI.