The U.S. Securities and Exchange Commission (SEC) has staunchly defended its settlement with Elon Musk regarding his acquisition of Twitter shares, asserting the agreement reflects “compromises” and was untainted by collusion. This robust defence follows U.S. District Judge Sparkle Sooknanan raising significant “red flags” about the accord. In a recent filing to the Washington, D.C. federal court, the SEC pushed back against judicial scrutiny, maintaining the integrity of the proposed resolution. The settlement mandates a trust in Mr. Musk’s name to pay a $1.5 million penalty to resolve claims of delayed disclosure.
The SEC’s claims allege Mr. Musk, the world’s wealthiest individual, delayed by 11 days in March and April 2022 the disclosure of his Twitter share purchases. The regulator suggests this allowed him to acquire them at lower prices before other investors became aware. Mr. Musk, who later paid $44 billion for the social media platform in October 2022 and subsequently renamed it X, has consistently maintained this delay was inadvertent. Notably, if approved, the settlement would also allow Mr. Musk to publicly deny the SEC’s accusations, reflecting a recent policy shift for defendants settling enforcement actions.
At a May 13 hearing, Judge Sooknanan expressed reluctance to simply “rubber stamp” the settlement. She questioned why the SEC chose to fine the trust instead of Mr. Musk directly, and why it was content to recoup just 1% of his alleged $150 million in ill-gotten gains. The judge stressed her obligation to ensure the settlement served the public interest and was free from any hint of collusion. In its filing, the SEC countered, affirming the agreement as “fair, reasonable, and appropriate,” and stating it “arose from arm’s length negotiations” and reflects “compromises from each side.” The regulator added the $1.5 million penalty is the largest of its type and that settling with the trust binds Mr. Musk through an investment vehicle, benefiting the public.
