A year of negotiations between Elon Musk and the Securities and Exchange Commission (SEC) culminated in a proposed $1.5 million civil penalty to resolve the agency’s lawsuit regarding Musk’s Twitter stake. Both Musk’s attorneys and the SEC defended the agreement after a federal judge expressed reservations about potential red flags in the settlement.
The SEC underscored that the penalty amount reflected a rigorous negotiation process and was higher than the defendants originally sought. Their court filing emphasized that the figure accounted for risks tied to litigation, including appeals, and the extensive public resources involved. The agency noted this would set a record penalty for this category of cases.
Musk’s legal team described the settlement as a fair compromise, wherein both parties made concessions to reach an agreement balancing their claims and defenses. The latest deal requires judicial approval and focuses solely on a civil penalty, dropping requests for disgorgement of profits and interest that the SEC initially pursued.
US District Judge Sparkle Sooknanan voiced reluctance to automatically endorse the settlement, highlighting concerns over whether Musk received preferential treatment and questioning why the SEC opted to settle with a trust connected to him. The judge’s caution signals further scrutiny ahead in the approval process.
The SEC’s lawsuit, filed in early 2025, alleges Musk failed to timely report accumulating shares in Twitter during 2022, causing shareholder harm estimated at over $150 million. Musk subsequently acquired the company, rebranding it as X. Notably, the SEC’s initial legal action came days before President Donald Trump’s administration began, during a period when Musk was a prominent Trump supporter who later distanced himself from the former president.