Judge Rules Trump and Sons Acted in 'Bad Faith' Trying to Sue Themselves for a $1.8B Slush Fund

President Donald Trump has suffered a fresh legal blow in Florida, where a federal judge has rejected a proposed deal that would have seen the Internal Revenue Service pay him $1.8 billion and has ruled that he and his sons acted in 'bad faith' by effectively trying to sue themselves over a controversial slush fund proposal.

Judge Says Trump's IRS Deal Was 'Self‑Dealing' Bad Faith

Trump had launched a sprawling $10 billion lawsuit against the IRS after a former contractor leaked his tax returns, a disclosure that he and his allies framed as proof of government 'weaponisation.'

That litigation, filed while Trump oversees the executive branch that includes the tax agency he was suing, set the stage for a proposed settlement under which the IRS would pay $1.8 billion into a fund ostensibly meant to compensate people who claimed they had been targeted by the state. The agreement attracted immediate scrutiny because it would have given Trump and affiliated entities protection from future tax audits, alongside control over a huge pool of public money.

In a detailed written ruling, U.S. District Judge Kathleen Williams concluded that the settlement was not a genuine attempt to resolve a live legal dispute but a vehicle to funnel public funds into a structure that would primarily benefit Trump and his circle.

She characterised the case as a form of self‑dealing, noting that the president was, in effect, suing an arm of his own administration in pursuit of a deal his allies had already shaped. By her account, the court was being asked to rubber‑stamp a controversial arrangement rather than adjudicate a real disagreement between independent parties.

For context, the proposed fund was pitched as a way to compensate individuals who said they had been victims of political 'weaponisation' by federal authorities, including people charged in relation to the 6 January 2021 Capitol riot who were later pardoned by Trump.

Critics in both major parties quickly pointed out that this structure would have allowed pardoned supporters to seek further cash relief, even as Trump's own businesses and entities received audit protections and reputational cover via a court‑blessed settlement.

The backlash was swift enough that the formal proposal was abandoned before Judge Williams issued her ruling, but the opinion lays out in stark terms why the courts refused to touch it.

Court Rejects $1.8 Billion Slush Fund Tied to Trump and Sons

The lawsuit itself sprang from the leak of Trump's tax records, a long‑running political flashpoint that has hovered over his business empire and his presidency. The former IRS contractor's disclosure fuelled calls for transparency, yet Trump's response was to frame the episode as unlawful targeting and then to seek an enormous damages package from the very agency charged with enforcing tax law. When that claim morphed into a settlement blueprint, the numbers were eyebrow‑raising even by Trump standards, with $1.8 billion earmarked for a fund that his legal team wanted the judiciary to bless.

According to Judge Williams, the approach failed at the most basic threshold: the federal courts require an actual case or controversy, not a staging ground for political or financial deals. In her opinion, she found that the lawsuit had been filed for an improper purpose, namely to obtain judicial legitimacy for a settlement that had already been negotiated in principle rather than to litigate contested facts or law.

Put bluntly, the judge said the court could not be used to provide legitimacy for arrangements of this kind, and she refused to let the system be bent into a tool for what critics have called a taxpayer‑funded slush fund.

IBTimes UK could not independently verify every characterisation attached to the proposed fund, so take everything lightly. What is clear from the ruling, however, is that the judge saw the structure as deeply problematic, both because of its design and because of who stood to gain.

The opinion also raises uncomfortable questions for Trump's sons, who were linked to entities that would have enjoyed protections and potential access to compensation under the agreement, another strand in the broader narrative of family‑centred political and financial manoeuvring.

Professional Consequences for Trump's Legal Team

The news came after the court turned its attention not only to the deal itself but to the lawyers who tried to push it through. Judge Williams did more than simply strike down the agreement: she imposed professional consequences on key members of Trump's legal team, signalling that the attempt to steer the judiciary into blessing the fund had crossed a line. Those steps underline how seriously the court viewed the effort to use litigation as a vehicle for self‑approved compensation rather than as a forum for resolving disputes.

In her order, Williams referred Trump's attorney Alejandro Brito to The Florida Bar for possible disciplinary review, inviting state regulators to scrutinise his role in the case. She also barred attorney Daniel Epstein from seeking admission to practise in the Southern District of Florida for one year, a sharp rebuke that effectively sidelines him from that federal jurisdiction in the short term.

Additional copies of the ruling were sent to disciplinary bodies asked to look into the conduct of senior Justice Department officials involved in the negotiations, meaning the fallout could spread beyond Trump's immediate inner circle.

The judge's opinion does not reopen the underlying tax‑return dispute, so the original leak and its political ramifications remain in their own lane for now.

Instead, the focus is squarely on how the president and his team tried to turn that saga into an enormous cash arrangement, and on whether the lawyers involved respected their duty to the court when they fashioned the lawsuit.

Nothing is confirmed yet so everything should be taken with a grain of salt when it comes to the wider political interpretation, but the legal message from Florida is hard to miss.

It is also notable that Williams questioned the conduct and motives of Justice Department officials who backed the settlement, hinting at internal tensions over how far the government should go to accommodate the president in litigation involving his personal financial exposure.

That scrutiny, paired with the disciplinary referrals, suggests this saga is not just about one failed fund but about how Trump's presidency continues to test the boundaries between public power and private gain. For a White House already juggling multiple investigations and courtroom battles, this is one more piece of mad legal stuff that could have long echoes in the professional lives of those who helped design it.