Elon Musk and the U.S. Securities and Exchange Commission defended their settlement over his purchase of Twitter shares, saying it reflected compromises and was not tainted by collusion, after the judge overseeing the case said the accord raised "red flags."
Musk called the settlement a fair, adequate and reasonable resolution where "each side gave something up and each side gained something," according to a Monday night filing in the Washington, D.C., federal court.
In a separate filing on Monday, the SEC added that the accord would let Musk publicly deny its accusations, reflecting a recent policy change governing defendants who settle enforcement actions. The settlement requires a trust in Musk's name to pay a$1.5 millioncivil penalty to resolve SEC claims the world's richest person took 11 days too long in March and April 2022 to disclose his purchase of Twitter shares, letting him buy at low prices before investors caught on. Musk maintained that the delay was inadvertent. He ultimately paid $44 billion for Twitter in October 2022 and renamed it X. Musk's businesses also include Tesla and SpaceX. At a May 13 hearing, U.S. District Judge Sparkle Sooknanan said she could not "rubber stamp" the settlement, questioning why the SEC fined the trust instead of Musk and was content to recoup just 1% of his $150 million of alleged ill-gotten gains.
She also said she must consider whether the settlement served the public interest, and was not tainted by collusion or corruption.
SEC SAYS THE SETTLEMENT BENEFITS THE PUBLIC
Musk and the SEC said the settlement did not reflect "improper collusion," and resulted from arm's-length negotiations.
According to the SEC, the $1.5 million penalty is the largest of its type, topping the previous $950,000 high, and settling with the trust mirrored the regulator's practice in recent cases. "The public benefits from an injunction that has the practical effect of binding Musk whenever he acts through the Revocable Trust, an investment vehicle that he appears to use to manage much of his wealth," the SEC said.
Musk, meanwhile, said he could have won at trial, including over whether a politically motivated SEC singled him out for enforcement and targeted his free speech.
He contrasted the penalty with the $500,000 penalty imposed in 2024 against billionaire investor Carl Icahn for "far more serious" conduct, waiting more than three years to reveal he pledged a majority of stock in his Icahn Enterprises to obtain billions of dollars in personal margin loans. Icahn Enterprises paid a separate $1.5 million penalty.
"Accepting a certain, immediate, record civil penalty in exchange for releasing a legally doubtful claim is paradigmatic bilateral compromise," Musk said. Musk is a former adviser to Republican President Donald Trump. The SEC sued Musk six days before Democratic President Joe Biden left the White House. SEC Chair Paul Atkins has refocused the regulator's priorities, as the Trump administration curtails corporate enforcement activity. Former SEC enforcement chief Margaret Ryan left abruptly in March after just six months on the job, following clashes with SEC leaders over enforcement.
