Judge approves SEC settlement with Musk trust after raising concerns
A federal judge approved a $1.5 million SEC deal tied to Musk’s Twitter stake disclosures while questioning its unusual structure.
By Sofia Marchetti · World Affairs Correspondent
3 min read
A federal judge in Washington approved a $1.5 million settlement between the Securities and Exchange Commission and Elon Musk’s trust over disclosures tied to his 2022 Twitter takeover. The approval matters because Judge Sparkle L. Sooknanan said the deal carried “red flags” and unusual terms, even as she allowed it to proceed.
Under the settlement, the civil penalty will be paid by Musk’s trust rather than by Musk personally, according to Sooknanan’s 12-page ruling issued Wednesday. The case involved the SEC’s claim that Musk failed to properly report his ownership stake in Twitter, now called X, before continuing to buy shares.
The SEC sued Musk in January 2025, alleging he crossed a 5% ownership threshold in Twitter and did not make the required disclosure within 10 calendar days. According to the SEC’s complaint, investors who intend to influence or take strategic action involving a public company must disclose such a stake after passing that threshold.
The SEC alleged that Musk delayed the filing because public disclosure would have lifted Twitter’s share price and made later purchases more expensive. The agency claimed he bought $500 million of Twitter stock after the disclosure deadline and saved about $150 million by doing so.
Sooknanan said the settlement raised concerns because the SEC dropped its claim against Musk and added his trust as a defendant shortly before seeking the consent judgment. The judge wrote that the SEC acknowledged it had not previously settled this type of Section 13(d) case with a trust without also settling with the trustee or beneficiary.
That structure was especially unusual, Sooknanan wrote, because the trust is revocable and Musk is both its sole trustee and sole beneficiary. The SEC had told the court that the trust is the world’s largest holder of Tesla stock and is valued at more than $180 billion, according to the ruling.
The judge also questioned the SEC’s decision to abandon a request for disgorgement of $150 million, which she said could have gone to investors allegedly harmed by Musk’s late disclosure. The SEC told the court it had not historically obtained disgorgement in cases of this kind and said the $1.5 million penalty was the largest ever for the violation at issue, according to the ruling.
Sooknanan said that comparison did not capture the scale of the allegations. She wrote that the SEC accused Musk, described in the ruling as the richest person in the world with a net worth close to $1 trillion, of disregarding disclosure duties in a way that saved him $150 million at other investors’ expense.
Still, Sooknanan said the court’s role was limited. She wrote that a judge is neither a “rubber stamp” nor an “ombudsman,” and that the legal standard allowed approval unless the settlement was so unreasonable that it would make a mockery of the court.
According to Fortune, the SEC did not immediately respond to a request for comment, Musk’s counsel did not immediately respond, and efforts to reach the trust were unsuccessful.
This story draws on original reporting from Fortune.