Elon Musk will pay the SEC $1.5 million for the settlement, the judge has signed despite ‘great doubts’

A US federal judge has approved a settlement that will see Elon Musk pay $1.5 million to the US Securities and Exchange Commission (SEC) for failing to disclose his purchase of Twitter stock in 2022 within the legally required timeframe. Still, he wasn’t happy about it. The penalty is just a fraction of the amount Musk earned for the alleged breach, which he is apparently free to keep.

In his order filed in District of Columbia Court on Wednesday, Judge Sparkle Sooknanan expressed “significant skepticism” about the deal between Musk and the SEC. Under the settlement, Musk will pay $1.5 million to the SEC — one percent of the $150 million he allegedly saved as a result of his late disclosure.

In addition, the fine will technically be paid on Musk’s behalf rather than directed by the billionaire himself, a tactic that the court noted appeared “for the sole purpose of Mr.

However, since the court’s role is only to assess whether the agreement meets “minimum standards of fairness and reasonableness,” Sooknanan said it is therefore bound to accept the agreement.

“[T]he Court cannot step into the SEC’s shoes, despite the fact that the SEC’s decisions in this case raise red flags,” wrote Sooknanan in his order on Wednesday. “Recognizing that principle and, as always, its proper role, the Court is forced to accept the agreement of the Parties despite serious doubts.”

Sooknanan also asked if Musk was getting special treatment.

“The Court remains to be seen whether the SEC will issue additional charges against the alleged securities violators,” he wrote. “Or is this a one-time deal for Mr. Musk that was negotiated without the involvement of the SEC’s attorneys who are prosecuting this case?”

The SEC filed a lawsuit in January last year, accusing Musk of late disclosing his purchase of Twitter stock in 2022. Securities Exchange Act of 1934, Musk was required by law to notify the SEC within 10 days of acquiring enough shares to own more than five percent of the company.

Instead, Musk is said to have waited 21 days, finally notifying the SEC of his purchase 11 days ago. Musk also reportedly bought more Twitter stock in those 21 days, spending another $500 million to increase his stake to 9.2 percent.

According to the SEC’s lawsuit, this delay had a significant financial impact not only on Musk, but also on other shareholders. Twitter’s stock price soared after Musk finally announced the purchase, his share price jumping to $2.89 billion as news of his investment became public. The billionaire is alleged to have saved at least $150 million on his additional share purchases, as he was able to buy them at a lower price than when he fulfilled his reporting obligations.

In addition to this, the SEC alleges that Musk’s failure to report his purchase of Twitter stock within the time allowed by law caused some investors “substantial economic harm,” as those who sold their shares during his delay were denied the benefit of the increased price.

The SEC initially sought to fine Musk, as well as make him forfeit any profits he made from his alleged violations. Now it’s singing a very different tune, agreeing to a relatively small fine of $1.5 million and apparently allowing Musk to keep the millions he’s made from alleged violations. In addition, no money will go to the investors who allegedly lost because of Musk’s delay.

“The SEC has decided not to seek relief that might compensate Mr. Musk’s alleged victims, instead looking for a way that will go into the government’s pocket,” Sooknanan said.

“That the Executive Branch (through the SEC) has done enough to hold Mr. Musk accountable for alleged violations of the law, like many other issues, is for our citizens to decide at the ballot box.”

Although the SEC filed the case during the Biden administration, it appears that it does not want to come down hard on Musk under Trump. Musk has had a tumultuous relationship with the president, seemingly vacillating between close confidant and bitter enemy. Considering this slap on the wrist, it seems reasonable to wonder if flirting and switching off might help turn the tide in the millionaire’s favor.