Judge accuses Trump of manufacturing IRS lawsuit to justify $1.776B 'anti-weaponization' fund

On July 13, 2026, a federal judge delivered a searing opinion that did more than temporarily block Trump's $1.776 billion 'anti-weaponization' fund—it accused the administration of 'manipulating the judicial process' by filing a baseless $10 billion lawsuit against the IRS solely to fabricate a settlement rationale for the payout scheme. The judge referred a DOJ lawyer for ethics investigation, marking the first time a court has directly sanctioned a government attorney for this strategy.

This ruling is the third major judicial defeat for the fund in six weeks, following the original injunction on June 25 and the indefinite extension on July 10. The fund, cobbled together without congressional approval, purported to compensate people who claimed to be victims of a 'weaponized' government—but plaintiffs argued, and the court agreed, that it was a de facto political loyalty payment system designed to reward Trump allies and evade federal appropriations law.

For Daylight watchers, this is a textbook case of executive overreach disguised as settlement authority. The administration tried to use the Treasury's Judgment Fund—intended for actual legal settlements—as a slush fund. The court's refusal to accept the DOJ's claim that the fund was 'not moving forward' as moot shows judges are now scrutinizing the administration's procedural games. The harm is not just to taxpayer accountability: this playbook, if successful, would let future presidents settle unfounded litigation with political allies using unlimited public money.