“The SEC has decided not to press for relief that could compensate Mr. Musk’s alleged victims, instead settling on a form of relief that would go into the government’s pocket,” Sooknanan wrote yesterday. The SEC told the court that it originally asked for disgorgement because it “has the statutory authority” to do so but dropped the request because it has not historically obtained disgorgement in this type of case, she wrote.
Settlement meets “minimum” standards
In May, Sooknanan told the SEC and Musk lawyers, “I am not going to rubber-stamp this settlement, and I cannot rubber-stamp this settlement.” She told the sides to provide more information on how the deal was reached and asked whether Musk is “getting some kind of special treatment.” She said in an order that the court must consider whether the settlement “resolves the claims in the complaint, and whether it was tainted by improper collusion or corruption.”
Sooknanan said yesterday that the settlement met the “minimum” standards.
“A court presented with a consent judgment is not a rubber stamp. But neither is it an ombudsman,” she wrote. “This Court is limited to evaluating whether the proposed consent judgment meets minimum standards of fairness and reasonableness, or whether it instead ‘make[s] a mockery of judicial power.’”
SEC and Musk lawyers told the court that the deal arose from over a year of negotiations and that both sides gave up something of value in exchange for limiting risks involved in the litigation, Sooknanan wrote.
“This is not to say that this settlement is run-of-the-mill,” she wrote. “The SEC admits that it has never before ‘settled a Section 13(d) violation with a trust without the trustee or beneficiary.’ And the Trust seems like a particularly odd candidate for the SEC to break that new ground—after all, as mentioned, the Trust is a revocable trust with Mr. Musk as its sole trustee and beneficiary.”
