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A US judge has signed off on the Securities and Exchange Commission’s (SEC) settlement with Elon Musk over his delayed disclosure of Twitter share purchases, but delivered a stinging rebuke of the regulator, suggesting the agreement raises uncomfortable questions about whether the billionaire received unusually favourable treatment.
In an order, US District Judge Sparkle Sooknanan approved a deal under which a trust linked to Musk will pay a $1.5 million civil penalty to settle allegations that he violated federal securities laws during his 2022 accumulation of Twitter shares.
The ruling ends the SEC’s lawsuit against Musk. But the judge made clear she was doing so reluctantly, saying the court had “significant misgivings” about the settlement while concluding it did not meet the high legal threshold required to reject it.
Sooknanan said federal courts are not free to rewrite settlements negotiated by regulators and defendants simply because they appear unsatisfactory.
Instead, the judge said her role was limited to deciding whether the agreement was fundamentally fair or whether approving it would “make a mockery of judicial power.”
That legal standard, she concluded, had not been crossed.
The case stemmed from Musk’s purchase of Twitter shares in early 2022, months before he acquired the social media company for $44 billion and later rebranded it as X.
The SEC alleged that Musk waited 11 days beyond the regulatory deadline to disclose that his ownership had crossed the 5 per cent threshold, allowing him to continue buying shares before the market became aware of his growing stake.
According to the regulator, that delay enabled Musk to acquire stock at lower prices and save about $150 million.
Musk has maintained that the late filing was an inadvertent mistake rather than an intentional attempt to evade disclosure rules.
The lawsuit was filed in January 2025, just days before Donald Trump returned to the White House.
In May, both sides agreed to settle the case without Musk admitting or denying the allegations. Under the agreement, a trust that manages much of Musk’s wealth — not Musk personally — will pay the $1.5 million penalty.
That arrangement became one of the central concerns highlighted by Sooknanan.
In a sharply worded opinion, she questioned why the SEC had abandoned its earlier effort to recover any alleged profits from the delayed disclosure and instead accepted a relatively modest financial penalty.
She also wondered why the settlement was structured through Musk’s trust, saying it allowed the billionaire to publicly claim he had effectively been cleared of wrongdoing.
“The court is left to wonder whether the SEC will afford other alleged securities-law violators such solicitude,” Sooknanan wrote, questioning whether Musk had received a level of accommodation unavailable to other defendants.
The judge further noted that SEC lawyers appearing before her earlier this year seemed unaware that settlement negotiations had already been taking place, prompting questions about how the agreement had been reached.
While stopping short of suggesting any misconduct by the agency, Sooknanan said the circumstances surrounding the settlement left unresolved concerns.
The SEC has defended the agreement, telling the court there was no collusion in the negotiations. It argued that the $1.5 million penalty was the largest ever obtained in a case involving delayed beneficial ownership disclosures and said the injunction included in the settlement would continue to bind Musk when acting through the trust.
The ruling also comes against the backdrop of Musk’s close ties with the Trump administration. The Tesla and SpaceX chief spent heavily to support Trump’s 2024 presidential campaign and later served as one of the president’s advisers, a relationship that had prompted the judge to earlier question whether the SEC had shown the billionaire special consideration.
Although the court’s approval formally closes the SEC’s case over Musk’s Twitter stock purchases, the judge’s unusually candid criticism is likely to fuel broader debate over whether America’s top market regulator applies the same standards to the country’s most influential corporate leaders as it does to everyone else.
