In a strategic move that intertwines his personal interests with the financial structure of the State, the President of the United States, Donald Trump, voluntarily and definitively withdrew his multi-million dollar lawsuit of 10 billion dollars against the Internal Revenue Service (IRS) and the Treasury Department. The action, originally motivated by the historic leak of his confidential tax returns, was formally dismissed this Monday in federal court in Miami.
But the news is that in exchange for filing the case, the Department of Justice has announced an unprecedented agreement: the creation of the so-called “fund against state arms.” (anti-weaponization fund), a mechanism endowed with 1,776 million dollars from taxpayers. This fund will be used to compensate individuals and organizations allied to the president who claim to have been the subject of unfair tax or judicial investigations for ideological reasons during the previous administration.
The withdrawal of the lawsuit was made “with prejudice”, a legal term that permanently buries the litigation and prevents the president, his eldest sons – Donald Trump Jr. and Eric Trump – or the Trump Organization from re-filing the same claim in court in the future.
The legal battle dates back to January of this year, when the president and his family filed a civil suit against the government’s financial agencies. They alleged systemic and serious negligence in not safeguarding the then president’s tax data between 2018 and 2020, AP recalls.
The material person responsible for the hacking and subsequent disclosure was Charles Chaz Littlejohn, a former contractor for the technology firm Booz Allen Hamilton who provided services to the IRS. Littlejohn illegally stole thousands of financial records from America’s largest fortunes – including those of Elon Musk and Jeff Bezos – and handed over Trump’s tax returns to media outlets such as The New York Times y ProPublica.
The publications revealed that the New York magnate paid minimal or no income taxes in multiple fiscal years, unleashing a political storm at the time. Littlejohn pleaded guilty and is currently serving a five-year sentence in federal prison. However, in the original lawsuit, Trump’s legal team argued that the government was fully responsible for the contractor’s actions under a “co-employment” theory, since the IRS exercised strict daily oversight over its work.
The text of the initial complaint bluntly detailed the impact of the leaks: “They caused plaintiffs reputational and financial harm, public embarrassment, unfairly tarnished their business reputations, portrayed them in a false light, and adversely affected the public standing of President Trump and the other plaintiffs.”
In addition, the president’s lawyers went so far as to quantify the damages by stipulating that every time a citizen read or viewed the newspaper articles containing the stolen data, an individual violation of the strict confidentiality laws of the IRS Code (Section 6103) was constituted, which justified the stratospheric figure of 10 billion dollars. According to the legal team, “the contractor who leaked this information has been imprisoned, the Trump administration’s Treasury Department canceled its contracts with the company that employed the leaker, and the IRS issued a rare public apology to taxpayers affected by the leak,” they stated to substantiate the flagrant state security failure.
An ethical labyrinth and judicial intervention
From the first day, the litigation aroused a wave of criticism from constitutional experts and defenders of public ethics. The fundamental contradiction was that Trump, upon assuming the presidency again, began to occupy the role of supreme head of the executive branch. In practice, he found himself in the unusual position of suing federal agencies of his own government, which operate under his direction and whose leaders answer directly to him.
The federal district judge in Miami in charge of the case, Kathleen Williams, expressed deep doubts about the constitutional viability of maintaining a trial where the plaintiff is, at the same time, the defendant’s hierarchical superior. Last month, the justice expressed her concerns in a withering court order: “Although President Trump claims that he is bringing this lawsuit in his personal capacity, he is the sitting president, and his named adversaries are entities whose decisions are subject to his direction. In fact, President Trump’s own comments on this matter recognize the unique dynamics of this litigation. Accordingly, it is not clear to this court whether the parties are sufficiently adverse to each other to satisfy the case or controversy requirement of Article III.”
To avoid responding to Judge Williams’ legal questions and avoid a possible adverse ruling that would dismiss the case due to lack of legitimacy, advisors from the White House and the Department of Justice accelerated political negotiations to resolve the dispute extrajudicially.
Donald Trump speaks to his sons Donald Jr and Eric Trump during the inauguration of a new family golf course, on July 29, 2025 in Balmedie, Scotland.
The money
Instead of transferring cash to the Trump family’s bank accounts, the deal funnels federal funds into a parallel structure managed on a discretionary basis. The new fund will have a supervisory commission in charge of distributing the 1,776 million dollars.
Among the potential beneficiaries of these economic compensations are conservative organizations and nearly 1,600 people charged or prosecuted in relation to the assault on the Capitol on January 6, 2021. The acting attorney general and former Trump defense lawyer, Todd Blanche, defended the measure by ensuring that the Department of Justice will offer a formal institutional apology to the Trumps and will seek to repair systemic injustices.
However, the clauses of the agreement stipulate that President Trump himself will maintain the exclusive power to dismiss and appoint the members who direct the fund commission, and that the organization will not be obliged to publicly make its internal money allocation processes transparent.
The response of the Democratic opposition and government control groups has been total indignation. Just minutes after Trump’s lawyers registered the withdrawal of the lawsuit in the Florida courts, a group composed of almost 100 Democratic congressmen from the House of Representatives, legally supported by lawyer Matt Platkin, filed a brief as friend of the court (friends of the court) to try to challenge the agreement. Various legislative spokespersons called the pact “institutionalized corruption” and accused the Executive of illegally diverting budget funds to benefit its inner political circle.
A representative of the Democratic congressmen harshly criticized the speed of the pact in a joint statement: “In settling his absurd $10 billion lawsuit against his own administration, Trump and the Department of Justice have just engaged in the most brazen act of self-employment in the history of the presidency, and they did it quickly to avoid the scrutiny of the judicial process, while very likely violating the Domestic Emoluments Clause of the Constitution.”
“Trump and the Department of Justice just engaged in the most brazen act of self-employment in the history of the presidency”
While ethics analysts warn about the worrying precedent of a sitting president settling private disputes by creating state discretionary funds, Trump’s legal camp celebrates the closure of the case as a political victory. By circumventing Judge Williams’ verdict, the White House has managed to transform adverse personal litigation into a multimillion-dollar financing mechanism for its support base, also shielding corporations associated with the tax services ecosystem from a long and destabilizing judicial audit process.
In recent hours, Trump has avoided clarifying whether his family will benefit from the fund created by the Department of Justice. When asked by the press, during an event at the White House, about whether his family will opt for any financial compensation, the president avoided responding and limited himself to praising the committee that will manage the approved fund. “I think it was a committee of five, and again, I did not make this agreement. They told me about it yesterday,” said the magnate. He added that, in his opinion, “there must be compensation for the people who were destroyed.”
