A federal judge has approved the SEC’s settlement with Elon Musk regarding his Twitter stock purchases, although she voiced “serious concerns” about various “red flags” surrounding the agreement.
U.S. District Judge Sparkle Skunanan, situated in Washington, D.C., acknowledged her limited role in assessing whether the settlement met basic fairness standards or risked undermining judicial authority. She also pondered whether the Trump administration was too lenient with Musk, who now stands as the world’s richest individual.
Judge Sukunanan noted, “The court where the consent decree was filed is not merely a rubber stamp. But it’s also not an ombudsman. Whether the SEC has done enough to hold Mr. Musk accountable for his alleged violations is ultimately up to the public’s decision at the polls.”
Musk has previously served as an advisor to Donald Trump, while Judge Sukunanan was appointed by President Biden.
The SEC spokesperson opted not to comment, and Musk’s attorney did not respond to requests for a statement.
This settlement establishes a trust under Musk’s name, which will pay $1.5 million to settle the SEC’s claim that he delayed disclosing his early Twitter stock purchases in March and April 2022.
According to the SEC, this delay benefited Musk as it allowed him to buy stock at a reduced price, ultimately saving him around $150 million.
Musk contended that the timing mishap was unintentional. He later acquired Twitter for $44 billion in October 2022, subsequently rebranding it as X.
This social media platform is now integrated within Musk’s SpaceX business. Musk is also the owner of Tesla, with Forbes estimating his net worth at approximately $927.2 billion.
Judge raises concerns over ‘one-time’ special treatment for Musk
In her ruling, Judge Sukunanan expressed doubts over why the SEC chose not to require Musk to forfeit his alleged ill-gotten gains as compensation for his supposed victims.
She remarked that while the SEC argued that it typically doesn’t seek disgorgement in similar cases, “I question what that implies about the settlement’s overall adequacy.”
Moreover, the judge wondered why the SEC settled with Musk’s trust, allowing him to publicly assert that he had been cleared of any wrongdoing.
Earlier in May, she noted that SEC attorneys seemed caught off guard during a preliminary hearing when Musk’s legal team disclosed that settlement negotiations were underway with the regulators.
“The court questions whether the SEC would provide such leniency to other alleged securities offenders,” Skunanan remarked. “Or is this a unique arrangement just for Mr. Musk, reached without input from the SEC attorneys overseeing the case?”
The settlement was revealed on May 4 after former SEC enforcement director Margaret Ryan resigned in March, having served just six months amidst disagreements with agency leadership over enforcement strategies.
The SEC has clarified in court filings that the settlement was not a result of collusion, and it emphasized that the $1.5 million fine constitutes the largest penalty of its kind to date.
Furthermore, it was reported that the public gained from a legal injunction that restricts Musk from utilizing certain investment vehicles he appears to control for much of his wealth.
