Federal judge questions $1.5M Musk-SEC settlement

A federal judge has raised concerns about a proposed $1.5 million settlement between Elon Musk and the U.S. Securities and Exchange Commission, questioning whether the deal serves the public interest and is free from improper influence. Both parties have since filed arguments defending the agreement as fair and reasonable.

The settlement would resolve an SEC lawsuit filed in January 2025, which alleged Musk violated securities law in 2022 by waiting 11 days to disclose he had acquired a significant stake in Twitter. The regulator claimed this delay allowed Musk to continue purchasing shares at artificially low prices, saving an estimated $150 million before he ultimately bought the company for $44 billion and renamed it X. Musk has maintained the delayed disclosure was inadvertent.

In a hearing on May 13, U.S. District Judge Sparkle Sooknanan said the settlement raised red flags and that she could not simply rubber-stamp the deal. She questioned why the SEC was seeking a penalty of just 1% of the alleged ill-gotten gains and why the fine would be levied against a trust in Musk’s name rather than against him personally. The judge stated she was obligated to consider whether the...