Judge reluctantly approves Elon Musk settlement with SEC over Twitter stock violation, says court cannot block it
A federal judge has approved a $1.5 million settlement between Elon Musk and the SEC over his failure to timely disclose a 9% stake in Twitter, despite expressing significant misgivings about the deal's fairness.
US District Judge Sparkle Sooknanan has reluctantly approved a $1.5 million settlement between Elon Musk and the Securities and Exchange Commission (SEC) over allegations that Musk failed to disclose his purchase of a 9% stake in Twitter within the required 10-day period in 2022. In her order, Judge Sooknanan stated she has "significant misgivings" about the settlement, describing "red flags" in the SEC's decision-making, but said the court is bound by a high legal bar and cannot reject the agreement.
The settlement resolves a lawsuit filed by the SEC in January 2025, shortly before President Joe Biden left office, after a nearly three-year investigation. The SEC had initially sought disgorgement of approximately $150 million in allegedly unjust profits, but dropped that demand. The final civil penalty is only about 1% of the potential amount at stake, as the judge noted.
Under the terms, a trust in Musk's name will pay the penalty, and an injunction against future violations applies to the trust rather than Musk personally. Judge Sooknanan observed that this arrangement allows Musk to publicly claim he has been cleared of wrongdoing. The SEC also abandoned efforts to compensate investors who may have been harmed.
While finding that the settlement meets minimum standards of fairness, the judge questioned whether the SEC would offer similar treatment to other defendants. She noted that the trust is a revocable trust with Musk as sole trustee and beneficiary, making it an unusual choice for the SEC to break new ground. Despite her reservations, the judge concluded that the court's role is limited and that the agreement must be accepted.
