- Judge Sparkle L. Sooknanan approved the U.S. Securities and Exchange Commission's settlement with Elon Musk over his purchase of Twitter shares, despite expressing significant misgivings about the deal.
- The settlement requires a trust in Musk's name to pay $1.5 million to resolve SEC claims that he took 11 days too long to disclose his early purchases of Twitter shares.
- According to the SEC, the delayed disclosure allowed Musk to buy shares at low prices, resulting in $150 million of ill-gotten gains.
- Judge Sooknanan questioned why the SEC dropped its demand for Musk to give up ill-gotten gains, allowing him to avoid disgorgement of $150 million.
- In her ruling, Sooknanan noted that the SEC's settlement terms are unprecedented, as it has never before settled a Section 13(d) violation with a trust without the trustee or beneficiary.
- The settlement was announced on May 4, following the departure of former SEC enforcement chief Margaret Ryan after only six months.
- Sooknanan expressed concerns about whether the SEC did enough to hold Musk accountable, stating that such issues are for the citizenry to decide at the ballot box.
A federal judge has approved a $1.5 million settlement between Elon Musk and the SEC regarding his delayed disclosures of Twitter share purchases, despite expressing significant misgivings about the deal. Judge Sparkle L. Sooknanan raised concerns over the fairness of the settlement, questioning whether it adequately held Musk accountable for his actions.1237
The SEC claimed Musk took 11 days too long to disclose his Twitter share purchases in March and April 2022, allowing him to buy shares at lower prices and resulting in $150 million in alleged ill-gotten gains. Sooknanan noted that the settlement's terms were unprecedented, as the SEC has never before settled a Section 13(d) violation with a trust without the trustee or beneficiary.4
In her ruling, Sooknanan highlighted the SEC's decision to abandon its demand for Musk to disgorge the $150 million in gains, which could have compensated affected investors. Instead, the settlement directs the penalty into the government’s coffers. She remarked, “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.”
The settlement was announced on May 4, following the departure of former SEC enforcement chief Margaret Ryan. The SEC stated that the $1.5 million penalty is the largest of its kind, although it did not result from collusion. Sooknanan's approval of the settlement raises questions about the adequacy of regulatory oversight in high-profile cases involving wealthy individuals.6
“The settlement requires a trust in Musk's name to pay $1.5 million, resolving claims that he delayed disclosing Twitter purchases, allegedly saving $150 million. Judge Sooknanan questioned the SEC's decision to drop demands for disgorgement, allowing Musk to claim he was cleared of wrongdoing.”
