Judge OKs Musk's $1.5 million settlement with SEC with 'red flags'

by · UPI

July 9 (UPI) -- A federal judge approved a $1.5 million settlement with the Securities and Exchange Commission for tech mogul Elon Musk over his alleged failure to report holdings on time, though she reported having "significant misgivings."

The SEC sued the trillionaire in January 2025 alleging he failed to disclose when his stock in Twitter went over 5% in 2022. He didn't report it until it reached 9%, costing Twitter's shareholders as much as $150 million when he eventually bought the social media company now known as X.

The two reached the settlement in May.

"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,'" U.S. District Judge Sparkle Sooknanan said in her decision.

"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.

"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."

In a June filing, the SEC said the settlement shows "compromises by all parties" and said the fine was the largest ever penalty for this violation.

It also said the decision to settle with Musk's trust instead of himself was requested by Musk and is an SEC compromise. It said the trust itself held the shares and not Musk.

"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," Sooknanan wrote.

"In approving the Parties' proposed consent judgment, the Court stresses that its role is limited. It may not 'substitute its judgment' for that of the parties.' That means that the Court may not step in the shoes of the SEC, notwithstanding that the SEC's decision-making in this case raises red flags."

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