Judge approves Musk's $1.5M SEC settlement with 'significant misgivings'

Judge questions SEC’s decision to settle with Musk’s trust, not Musk

A federal judge on Wednesday approved a $1.5 million settlement between Elon Musk and the Securities and Exchange Commission over his delayed disclosure of a Twitter stock purchase, but she wrote that the agency’s decision-making in the case “raises red flags” and that she had “significant misgivings” about the deal.

U.S. District Judge Sparkle Sooknanan accepted the consent judgment after finding it did not meet the “high threshold” for a court to reject a settlement, even as she questioned whether the SEC had done enough to hold the billionaire accountable and why the penalty ran against Musk’s trust rather than Musk personally.

The SEC sued Musk in January 2025, alleging he failed to disclose when his stock in Twitter exceeded 5% in 2022. Musk did not report his holdings until they reached 9%, according to the complaint. Shareholders allegedly lost as much as $150 million when Musk eventually purchased the social media company, now known as X, the SEC said.

In a 12-page ruling, Sooknanan wrote that the court’s role is limited. “This Court is limited to evaluating whether the proposed consent judgment meets minimum standards of fairness and reasonableness, or whether it instead ‘make[s] a mockery of judicial power,’” she said. “Although the Court has significant misgivings about the settlement reached in this case, it cannot say that the settlement meets that high threshold. That means that this Court must accept the Parties’ consent judgment.”

The settlement, reached in May, requires Musk’s trust — not Musk personally — to pay the $1.5 million civil penalty. The SEC said the arrangement was requested by Musk and characterized it as a compromise. In a June filing, the agency described the settlement as showing “compromises by all parties” and noted the fine was the largest ever penalty for this type of violation.

Sooknanan expressed skepticism about the trust arrangement. “But one might ask why the proposed consent decree runs against the Trust and not Mr. Musk — other than allowing Mr. Musk to proclaim publicly that he has been cleared of wrongdoing — and why the SEC has permitted that result,” she wrote. The SEC admitted it had never before settled a Section 13(d) violation with a trust without the trustee or beneficiary, according to the ruling. Sooknanan noted the trust “seems like a particularly odd candidate for the SEC to break that new ground.”

She concluded by deferring the broader question of accountability to the political process. “Whether the Executive Branch (through the SEC) has done enough to hold Mr. Musk to account for his alleged violation is, like many other issues, for our citizenry to decide at the ballot box.”