A Judge Voided the Sham Lawsuit Trump Filed Against His Own IRS to Launder Himself Tax Immunity and a $1.776 Billion "Anti-Weaponization" Slush Fund for His Allies — Finding "Bad Faith," No Real Case, and Referring Acting AG Todd Blanche for Discipline Two Days Before His Confirmation Hearing for the Permanent Job

To understand the scale of what a federal judge just tore down, hold two facts together: the President of the United States sued the IRS, an agency he controls — and then "settled" with himself, on terms that handed his own family immunity from tax investigation and set aside $1.776 billion in public money for people who say the government wronged them. There was no opponent. There was no dispute. There was only Trump on both sides of the table, using a courtroom to make it look legitimate.

On July 13, 2026, U.S. District Judge Kathleen Williams — an Obama appointee in the Southern District of Florida — refused to play along. Her 56-page order voids the whole arrangement, sanctions the lawyers, and refers the acting attorney general of the United States for professional discipline. Two days before his confirmation hearing for the permanent job.

The sham, step by step

• January 2026: Trump and his two eldest sons sue the IRS for $10 billion, alleging the agency failed to keep his tax returns private after a contractor leaked them to the press during his first term
• May 2026: "Both sides" settle — while Judge Williams was still deciding whether to throw the case out. But the defendant was the federal government Trump runs. He controlled the plaintiff and the defendant
• The settlement's two payloads:
  • A $1.776 billion "anti-weaponization fund" to pay claims from Trump allies — the fund was premised on January 6, 2021 and the classified-documents case, i.e., designed to reward the people prosecuted for those things
  • A tax-amnesty memo signed by Blanche — quietly appended to the DOJ's announcement the next day — barring the IRS from investigating Trump, his family, or his businesses for past tax issues, and barring other federal claims for any conduct pre-dating the deal

In short: Trump sued his own administration to obtain, under the cover of a court settlement, both a personal shield from tax scrutiny and a taxpayer-funded payout machine for his supporters.

The former judges who blew the whistle

Nearly three dozen former federal judges — appointed by presidents of both parties — intervened in May, asking Williams to reopen the case. Among them was J. Michael Luttig, the prominent conservative Bush appointee, and John Tinder, whose appeals-court seat was later filled by Justice Amy Coney Barrett. Their charge was blunt: the agreement was "the product of collusion" and "a fraud on the court."

What the judge found

Williams agreed, comprehensively.

On the absence of any real case:

"In sum, the facts before this Court demonstrate there was never adverseness between the Parties; there was never a case or controversy; and there was never a question as to who would prevail."

On the purpose: Trump "improperly" used the lawsuit "as a means of conferring legitimacy upon a course of action that they were unwilling to subject to judicial review." The plaintiffs — Trump, his two eldest sons, and the Trump Organization — "acted in bad faith."

On the immunity: the tax-amnesty order Blanche signed alone "directly contravenes" the federal law that bars presidents and other executive-branch leaders from influencing tax audits.

On the DOJ: it was "abdicating its responsibility to zealously defend the interests of the United States," having "deviated from its litigation posture in similar actions" and "disregarded DOJ policies."

On the suspiciously symbolic price tag — 1776, the year of independence, as a dollar figure — she was withering: the $1.776 billion "speaks of a 'branding' effort rather than a deliberate and thoughtful calculation of damages."

The conflict of interest

The two Justice Department officials who blessed the deal were not neutral. Todd Blanche, now acting attorney general, had been Trump's personal criminal-defense lawyer. Stanley Woodward, the associate attorney general, had represented January 6 defendants and a Trump aide charged alongside the president in the classified-documents case — exactly the kinds of people the $1.776 billion fund was built to pay. Williams:

"Instead of either recusing because of their previous representations or vigorously defending this lawsuit as required to do so by DOJ policies and procedures, these lawyers agreed to a 'settlement' involving a staggering amount of money potentially benefitting former clients."

Blanche's "disingenuous" testimony

The judge singled out Blanche's May 19, 2026 testimony to Congress. Asked why the settlement had never been submitted to the court for review, he had answered that "there is no judge" because the case had been dismissed, so there was "no mechanism" for review. Williams:

"The Court is extremely troubled by the testimony given by Acting Attorney General Blanche. While temporally accurate, this answer is, at best, misleading and, at worst, disingenuous."

The consequences

• The settlement is void. Trump and the government are prohibited from referring to the "settlement agreement" or using it in any judicial, administrative, regulatory, arbitration, or other official proceeding — meaning the immunity Trump bought cannot be invoked as a defense later
• Blanche and Woodward were referred to the State Bar of New York and the D.C. Bar, respectively — where disciplinary proceedings against them are already ongoing, with this order added to the file
• Alejandro Brito, Trump's private attorney, was referred to the Florida Bar
• Daniel Epstein's ability to practice in the Southern District of Florida was limited
• Monetary sanctions (to reimburse the former judges' legal fees) and non-monetary sanctions were ordered

Williams ended her opinion with John Adams, who as a defense lawyer told a jury that "Facts are stubborn things": "whatever may be the Parties' wishes, inclinations, or the dictates of their passion, they cannot alter the state of the facts or evade the rule of law."

Why it matters

The anti-weaponization fund had already collapsed under bipartisan blowback — Blanche said in June the department was "not moving forward" with it, after an earlier court injunction. But the audit-immunity provision remained in place until this ruling knocked out the settlement it rode in on. The president had, in effect, tried to purchase permanent protection from tax investigation for himself, his sons, and his companies, using a lawsuit against a government he runs as the delivery vehicle.

And the man who signed the immunity memo, who gave Congress the answer the court called "disingenuous," and whom a federal judge just referred to the bar — Todd Blanche — was scheduled to sit before the Senate Judiciary Committee two days later, asking to be confirmed as the nation's permanent attorney general. Even Republican senators had said they wanted answers about the fund and the immunity. Now they have 56 pages of them, from a federal judge, on the record.

The judge did leave one narrow door open, almost as a dare: Trump and the government remain free to strike a private deal for a fund or immunity — as long as it is separated from the IRS case and not dressed up as a court settlement. The point was precise. The problem was never that Trump wanted these things. It was that he used a federal court, and the Justice Department, to manufacture the appearance that a judge had blessed them. A judge just said, in writing, that no judge ever did.