The U.S. Securities and Exchange Commission (SEC) has stood by its settlement agreement with Elon Musk regarding his acquisition of Twitter stock, asserting that the deal represents necessary “compromises” and is entirely free of collusion. The regulatory body’s defense comes after the presiding judge noted that the agreement raised “red flags.”
According to a legal filing submitted to the Washington, D.C. federal court, the SEC noted that the finalized agreement will permit Musk to openly contest the allegations. This condition aligns with a newly adopted agency policy regarding defendants who resolve enforcement cases out of court.
Under the terms of the deal, a trust under Musk’s name is required to pay a $1.5 million penalty. This resolves claims by the SEC that the billionaire delayed disclosing his growing stake in Twitter by 11 days during March and April of 2022.
The regulator alleges this delay allowed him to accumulate shares at artificially depressed prices before the broader market became aware of his buying activity.
Musk has maintained that the late filing was an honest mistake. He eventually acquired the social media platform for $44 billion in October 2022 and subsequently rebranded it as X.
The settlement faced scrutiny during a May 13 hearing when U.S. District Judge Sparkle Sooknanan stated that she could not “rubber stamp” the agreement.
Judge Sooknanan questioned the SEC’s decision to penalize Musk’s trust rather than the billionaire himself. Furthermore, she raised concerns over the regulator’s willingness to accept a fine that amounts to a mere 1% of the estimated $150 million in illicit profits Musk allegedly secured.
The judge emphasized her responsibility to ensure the arrangement serves the public interest and is not “tainted by collusion” or corruption.