Judge Nullifies Trump-IRS Settlement Behind Controversial Weaponization Fund

President Donald Trump speaks at Rockland Community College, Friday, May 22, 2026, in Suffern, N.Y. (AP Photo/Alex Brandon)

Federal Judge Kathleen M. Williams nullified on Monday the settlement reached between the IRS and President Donald Trump earlier in the year, which was used to set up a highly controversial $1.7 billion fund to pay out alleged victims of government weaponization.

Trump’s Justice Department abandoned the fund amid an outcry of criticism that the administration was setting up a “slush fund’ to pay out its allies using taxpayer funds.

“This action was never about a party seeking judicial resolution of a legal issue or a factual dispute. The nature of the suit itself and the conduct of the Parties and counsel from its filing make plain that this was an attempt to use the Court to provide some legitimacy to an agreement to confer immunity to people and entities affiliated with the President and to earmark billions of dollars from American taxpayers to redress grievances not defined in the law,” wrote Williams on Monday.

Judge Williams also recommended disciplinary action for the lawyers involved in the initial settlement, which stemmed from Trump suing the IRS over media outlets obtaining copies of his tax transcripts.

“Court finds that this matter was brought for an improper purpose—to gain the imprimatur of judicial legitimacy for a ‘settlement’ that had no viable basis in law or fact,” added the judge, blasting the Justice Department and the IRS over the settlement of Trump’s lawsuit.

The judge specifically called out Acting Attorney General Todd Blanche, Trump’s former personal attorney.  Judge Williams cited public comments made by Blanche about the fund and pinpointed a statement which “demonstrates his confidence that he could speak for, and bind, both sides of this matter. This certitude supports the conclusion that the Parties worked in tandem and were never actually adverse.”

Trump’s lawsuit against the IRS being settled by his own Justice Department, led by a close personal ally and defender, set off alarm bells throughout the country as critics warned of further erosion of DOJ independence.

This is a developing story and has been updated.

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