A US federal judge has cast doubt on the motives behind the US Securities and Exchange Commission’s (SEC) $1.5 million settlement with Elon Musk regarding his purchase of Twitter. US District Judge Sparkle Sooknanan, based in Washington, D.C., suggested the agreement might have been structured to specifically avoid penalising Musk personally. Judge Sooknanan had previously summoned attorneys for both sides to explain what she termed a string of “irregularities” in the deal, affirming she would not simply “rubber stamp” their arrangement.
The judge outlined several “red flags,” including the SEC’s decision to remove Musk as a defendant and replace him with a legal trust bearing his name. The settlement also saw the removal of demands for the return of $150 million in allegedly ill-gotten gains, alongside a 99 per cent reduction in the total amount initially sought by the regulator. Sooknanan further noted her surprise when SEC lawyers, at a prior hearing, appeared unaware that settlement talks had been ongoing with Musk’s legal team, characterising this as another significant concern.
This latest development marks another twist in a years-long dispute between the SEC and the Tesla boss over his $44 billion acquisition of Twitter, which closed in October 2022. The SEC had accused Musk of delaying the disclosure of his Twitter share build-up in 2022. Twitter is a prominent social media platform where users can share short messages and engage in public discourse. Despite the substantial reduction from the initial demands, the $1.5 million penalty imposed on Musk’s trust reportedly stands as the largest in SEC history for this specific type of violation. The judge stated she must weigh the settlement’s fairness, consistency with public interest, and whether it is “tainted by improper collusion or corruption.”
