A federal judge approved a settlement between the U.S. Securities and Exchange Commission and Elon Musk concerning his acquisition of Twitter stock on Wednesday, despite expressing "serious misgivings" about "red flags" raised by the agreement.

U.S. District Judge Sri Srinivasan in Washington, D.C., stated she played a limited role in assessing whether the settlement met the minimum standards of fairness and reasonableness or was "a mockery of judicial power," and questioned whether the Trump administration had been overly lenient with the world's wealthiest individual.

"A court faced with a consent decree is not a rubber stamp, but it is not an ombudsman either," wrote Judge Srinivasan. "Whether the executive branch (through the SEC) has done enough to hold Mr. Musk accountable for his alleged violations—like so many other questions—is for our citizens to decide at the ballot box."

Musk was an adviser to former Republican President Donald Trump. Judge Srinivasan was appointed to the bench by former Democratic President Joe Biden.

The settlement requires a trust established in Musk's name to pay $1.5 million to resolve SEC allegations that he was 11 days late in disclosing his early purchases of Twitter stock in March and April 2022.

According to the SEC, the delayed disclosure allowed Musk to buy Twitter shares at a lower price before investors were aware, saving him an estimated $150 million.

Musk has stated the delay was unintentional. He ultimately completed a $44 billion acquisition of Twitter in October 2022 and renamed the company X.

The social media platform is now part of Musk's rocket and satellite company, SpaceX. Musk also leads the electric vehicle company Tesla Motors (TSLA). His net worth is reportedly $927.2 billion.

Judge Questions Special Treatment for Musk

In her ruling, Judge Srinivasan questioned why the SEC abandoned its claim that Musk should disgorge ill-gotten gains to compensate his alleged victims.

She stated the SEC's argument that it "has not historically sought disgorgement in similar cases" may or may not be fair, "but it calls into question whether this settlement is appropriate from the outset."

Srinivasan also questioned why the SEC chose to settle with Musk's trust, which allowed Musk to publicly state he had been vindicated.

The judge noted that during a prior hearing in May, SEC lawyers appeared surprised when Musk's counsel revealed that settlement negotiations with the regulator had occurred.

"This court cannot help but wonder whether the SEC would afford such solicitude to other alleged violators of the securities laws," wrote Srinivasan. "Or is this a special, one-off deal for Mr. Musk, negotiated without the involvement of the SEC attorneys responsible for litigating this case?"

The settlement was announced on May 4th, following the departure of former SEC enforcement chief Margaret Ryan in March after just six months in the role.

Ryan had reportedly clashed with the agency's leadership over the direction of its enforcement program.

The SEC stated in court filings that the settlement was not the product of collusion and that the $1.5 million penalty is the largest of its kind in a comparable case.

The agency also said the public benefits from an injunction that is binding on Musk when he acts through the trust, which "appears to be the investment vehicle he uses to manage a significant portion of his wealth."