Judge approves SEC settlement with Musk despite ‘significant misgivings’

A federal judge approved the Securities and Exchange Commission’s (SEC) $1.5 million settlement with Elon Musk on Wednesday, saying the agreement did not meet the “high threshold” for the court to strike it down despite “significant misgivings.”

The final approval of the settlement, which the SEC first announced in May, resolves a yearslong dispute with the tech mogul.

After a nearly three-year probe, the agency sued Musk in January 2025 for failing to disclose when his stake in Twitter, now known as X, surpassed 5 percent as he bought up stock in the company in early 2022.

“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,” U.S. District Judge Sparkle Sooknanan said in Wednesday’s order.

Musk began buying stock in Twitter in early 2022 but did not disclose his stake until it reached 9 percent in April of that year, a move the SEC argued allowed him to underpay by $150 million. He ultimately acquired the company for $44 billion in October 2022.

The SEC’s investigation into Musk’s purchase of Twitter shares stretched out over almost three years, amid a series of disputes with the billionaire over sitting for further depositions.

After the agency announced the settlement earlier this year, the judge raised several questions, noting the agreement presented “some red flags.”

In an early June filing, the SEC argued that the settlement reflects “compromises by all parties” and touted the fine as the largest ever penalty for this type of securities violation.

It also explained its decision to settle the case with Musk’s trust rather than Musk himself, saying this was “a request by Musk and a compromise by the SEC” and arguing the trust held the shares at issue and faced the same disclosure requirements.

“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 noted in Wednesday’s order.

She later added, “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.”