The U.S. Securities and Exchange Commission and Elon Musk are defending their proposed $1.5 million settlement over Musk’s delayed disclosure of Twitter stock purchases after a federal judge raised concerns about the agreement. In separate filings in Washington, D.C., federal court, both sides argued that the settlement was the product of arm’s-length negotiations and was not tainted by improper collusion.
The SEC sued Musk over claims that he waited 11 days too long in March and April 2022 to disclose his purchases of Twitter shares. The agency alleged that the delay allowed Musk to buy shares at lower prices before other investors learned of his stake. Musk has maintained that the late disclosure was inadvertent.
U.S. District Judge Sparkle Sooknanan questioned the settlement at a May 13 hearing, saying she could not simply “rubber stamp” the agreement. She asked why the SEC imposed the penalty on a trust in Musk’s name rather than on Musk directly, and why the $1.5 million penalty represented only about 1% of the SEC’s alleged $150 million in ill-gotten gains.
The SEC argued that the penalty is the largest of its kind and said resolving the case with the trust was consistent with its approach in recent matters. The agency also said the settlement would allow Musk to publicly deny the allegations, reflecting a recent policy change for defendants who settle enforcement actions.
Musk said the settlement was a fair compromise and argued that he could have prevailed at trial, including on claims that the SEC targeted him for political reasons and over free speech issues. He described the agreement as a “paradigmatic bilateral compromise,” saying each side gave up legal positions to reach a certain and immediate resolution.
