The US Securities and Exchange Commission and Elon Musk’s legal team both filed court memos Monday defending their proposed $1.5 million settlement over his 2022 disclosure failure during his acquisition of Twitter, Inc. — with the SEC calling it the largest penalty ever obtained in such a case — even as the federal judge overseeing the matter continues to signal the deal may not pass muster.
US District Judge Sparkle Sooknanan put both parties on notice at a May 13 hearing, saying she would not “rubber stamp” a proposed consent judgment in which the Elon Musk Revocable Trust Dated July 22, 2003 would pay the civil penalty while Musk himself would be dismissed from the litigation.
She also asked directly whether Musk was receiving special treatment, noting that the $1.5 million figure represents roughly 1% of the $150 million the SEC contends investors lost because of his disclosure failure.
The case centers on Musk’s 2022 accumulation of Twitter shares. Section 13(d) of the Securities Exchange Act of 1934 — a strict liability statute — requires anyone who acquires more than 5% of a publicly traded company’s shares to file a beneficial ownership report with the SEC within 10 calendar days.
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The SEC alleges Musk crossed that threshold in mid-March 2022 but did not file until April 4 — 11 days past the deadline. Twitter’s stock jumped more than 27% on the day of his disclosure, a price increase the agency argues should have occurred weeks earlier. Investors who sold their shares during those 11 days, unaware of Musk’s accumulation, lost at least $150 million in potential gains, according to the SEC’s complaint.
The SEC filed suit in January 2025. This May, it amended the complaint to add Musk’s revocable trust as a defendant and simultaneously moved for a consent judgment — settling the trust’s liability for $1.5 million while seeking Musk’s personal dismissal. Sooknanan ordered both parties to explain the terms in writing by June 1.
In its response memo filed Monday, the SEC described the settlement as the product of nearly a year of negotiations and said Musk’s side had pushed for an even smaller penalty. The agency characterized $1.5 million as “the largest penalty the SEC has ever obtained in a case involving a standalone violation of Section 13(d) of the Securities Exchange Act of 1934” and said the figure accounts for litigation risk and the public resources required to manage potential appeals. Musk’s attorneys called the deal a fair compromise.
“Each side gave something up and each side gained something,” they wrote.
The proposed deal is a significant retreat from the SEC’s original complaint, which sought disgorgement of roughly $150 million in alleged ill-gotten gains plus prejudgment interest in addition to civil penalties. The consent judgment covers only the $1.5 million civil fine.
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The SEC’s memo also disclosed that if the court approves the deal, Musk can publicly deny the agency’s allegations — a shift the SEC attributed to a recent policy change governing defendants who settle enforcement actions.
The judge has not yet ruled on whether to approve the deal.
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