Elon Musk SEC settlement raises ‘red flags,’ judge says

Being the richest person in the history of the world comes with its own headache, and Elon Musk has a migraine the size of his legal battles.

Tesla is being sued over the autopilot crash, misleading statements about Robotaxi, and alleged workplace discrimination. Musk himself has been in court recently over his lawsuit against OpenAI, and the NAACP is suing Musk over xAI’s use of polluting gas turbines in a Mississippi data center. He even lost a paternity suit filed by the mother of his child.

It can be said that the court system is part of his life right now. However, even though he has a lot of experience in court, there are still decisions and cases that make you scratch your head.

Take the lawsuit the US Securities and Exchange Commission filed against him, for example.

SEC settles allegations of Musk’s fraud during Twitter purchase

This week, a judge accepted a settlement agreement between the SEC and Elon Musk regarding disqualification when he bought Twitter in 2022.

Musk allegedly used deception to save himself $150 million in closing costs during the purchase.

The settlement allows Musk to deny any wrongdoing, and his fine represents only 1% of the $150 million total, leading the judge who approved the settlement to question everything.

The judge in Elon Musk’s case hates the deal he approved

This week, the SEC’s lawsuit against Elon Musk over his purchase of Twitter came to an end with US District Judge Sparkle Sooknanan approving a settlement that imposed a $1.5 million fine against the billionaire.

The SEC filed the lawsuit in 2025, a few days before President Donald Trump took office, over Musk’s purchase of the social network in 2022. The regulatory body said Musk forfeited $150 million of the company’s $44 billion purchase price by failing to disclose his growing stake in the company.

So the $1.5 million fine represents only 1% of that amount, and the judge was clearly not happy with the outcome.

In his opinion, Sooknanan said his court is “limited to assessing whether the proposed consent decree meets the minimum standards of fairness and reasonableness,” or “does[s] the power of judgment is a mockery.”

“While the Court has serious doubts about the decision reached in this case, it cannot say that this settlement meets that high threshold,” Sooknanan wrote in the decision.

Musk had initially filed a motion with the court to dismiss the appeal, but the court denied the motion.

Ultimately, this version of the SEC under Trump filed an amended complaint that the court ruled on this week. That amended complaint also added a revocable trust as a defendant alongside Musk.

Court notes “red flags” in SEC-Musk settlement

The court noted that “some things about this settlement … raise red flags.”

This includes the fact that the SEC filed an amended complaint just three minutes before the decision on the consent decree, and the fact that Musk’s own lawyers admitted that “there have been discussions with the government about the possibility of a settlement in this case.”

The addition of the trust as a defendant was also a red flag for the judge, as it appears that the “Trust [was] delivery for the sole purpose of Mr. Musk was able to say that no relief was done for him personally. “

Despite his misgivings, the judge noted that “the court’s duty in passing a settlement agreement is very different from its duty to conduct a fair trial.”

His role in the case was simply to ensure that the settlement was not “ridiculous,” although some may argue that the court’s decision failed in that regard as well.

Related: Tesla faces lawsuit from family of victim who died in Texas home accident

This story was originally published by TheStreet on Jul 10, 2026, where it first appeared on Personality part. Add TheStreet as a Preferred Source by clicking here.