A U.S. federal judge has approved Elon Musk’s settlement with the Securities and Exchange Commission over his delayed Twitter share disclosures, but the ruling came with unusually sharp concerns about whether the agreement treated the billionaire too lightly.
U.S. District Judge Sparkle Sooknanan approved the settlement even after pointing to serious concerns and “red flags” in the agreement.
Musk Trust to Pay $1.5 Million
The case is tied to Musk’s purchase of Twitter shares before he eventually bought the company for $44 billion.
Reuters reported that the settlement requires a trust in Musk’s name to pay $1.5 million after the SEC said Musk missed the required disclosure deadline by 11 days while building his Twitter stake in March and April 2022.
The SEC argued that the delay gave Musk a major financial benefit. The agency said Musk saved about $150 million because he was able to continue buying Twitter shares at lower prices before the market learned about his growing stake. Musk later completed the Twitter acquisition in October 2022 and eventually renamed the platform X.
Judge Raises Fairness Questions
Although Sooknanan approved the agreement, she made clear that her decision should not be read as full endorsement of the deal. The judge said her role was limited to deciding whether the settlement met basic standards of fairness and reasonableness, or whether it would “make a mockery of judicial power”.
The judge also questioned whether the SEC would show the same level of flexibility to other defendants. Sooknanan asked whether other people accused of securities-law violations would receive similar “solicitude,” or whether the deal was a special arrangement made only for Musk.
MSN highlighted that the settlement was approved even though the judge saw warning signs in the agreement.
SEC No Longer Sought Musk’s Alleged Gains
One major issue was the SEC’s decision to step back from a larger financial demand. Sooknanan questioned why the regulator abandoned its push for Musk to surrender alleged improper gains that could have been used to compensate harmed investors.
The judge also raised concerns about the structure of the settlement. She questioned why the agreement was made with Musk’s trust, a structure that allowed Musk to publicly claim he had been cleared of wrongdoing.
The SEC defended the outcome. The agency told the court the settlement was not collusive and said the $1.5 million penalty was the largest of its kind. The agency also argued that the public gained protection from an injunction that applies when Musk acts through the trust.
A Settlement That Still Leaves Questions
The case remains politically and publicly sensitive because Musk is one of the most influential business figures in the United States. Musk previously advised Republican President Donald Trump, while Sooknanan was appointed by former Democratic President Joe Biden.
The settlement resolves one SEC case connected to Musk’s Twitter takeover, but it does not fully quiet concerns about enforcement consistency. The court approved the agreement, yet the judge’s remarks leave a larger issue hanging over the case: whether powerful executives receive the same treatment as ordinary investors and market participants when disclosure rules are broken.
