SEC Defends Elon Musk Settlement as Judge Questions Its Fairness

The U.S. Securities and Exchange Commission is defending its $1.5 million settlement with Elon Musk over his late disclosure of Twitter share purchases, after a federal judge flagged it as raising 'red flags.' The settlement requires a trust in Musk's name to pay the fine to resolve claims that Musk took 11 days too long in 2022 to disclose his purchase of Twitter shares.

Judge Sparkle Sooknanan questioned why the trust, rather than Musk personally, was fined and why the penalty represented just 1 percent of his alleged $150 million in ill-gotten gains. She also said she must consider whether the settlement serves the public interest and is free of collusion.

In a Monday filing, the SEC argued the settlement was 'fair, reasonable, and appropriate' and resulted from arm's length negotiations. The agency also noted the penalty was the largest of its kind and that the settlement would legally bind Musk when acting through his revocable trust.

Musk, who has called the SEC politically motivated, ultimately bought Twitter for $44 billion and renamed it X.