On Monday, the U.S. Securities and Exchange Commission pushed against concerns raised by a federal judge over its settlement with Elon Musk related to his delayed disclosure of Twitter share purchases.
SEC Says Settlement Was Reached Through ‘Arm’s Length Negotiations’
In a filing submitted to federal court in Washington, D.C., the SEC defended its proposed settlement after U.S. District Judge Sparkle Sooknanan questioned whether the deal adequately served the public interest and warned she would not simply “rubber stamp” the agreement, Reuters reported.
“[The settlement is] fair, reasonable and appropriate,” the regulator said, adding that it was “not the result of any improper collusion between the parties,” but instead reflected “arm’s length negotiations among counsel of record” and compromises by both sides.
The case centers on allegations that Musk waited 11 days too long in March and April 2022 to disclose that he had accumulated a significant stake in Twitter, allowing him to continue purchasing shares before the market fully reacted.
Why The Judge Questioned The $1.5 Million Penalty
Under the proposed settlement, a trust associated with Musk would pay $1.5 million to resolve the SEC’s claims.
At a May hearing, Sooknanan questioned why the fine would be paid by Musk’s trust rather than Musk personally and why regulators were seeking what she described as a relatively small penalty compared with approximately $150 million in alleged gains.
The SEC responded that the penalty was the largest of its kind and argued that targeting the trust was appropriate because it functions as an investment vehicle through which Musk manages much of his wealth.
“The public benefits from an injunction” tied to the trust, the agency said.
Musk Can Publicly Deny SEC Allegations
The filing also revealed that, if approved, the settlement would allow Musk to publicly deny the SEC’s allegations.
Musk has previously argued the case was politically motivated and said his delayed disclosure was inadvertent.
He ultimately acquired Twitter for $44 billion in October 2022 and later rebranded the platform as X.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock/Frederic Legrand – COMEO
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