Trump Retreats on $1.8 Billion 'Anti-Weaponization' Fund After Legal and Political Collapse

President Trump is abandoning his plan to create a $1.8 billion compensation fund for people who claimed they were unfairly prosecuted by the government — a fund widely characterized as a political slush fund designed to reward his allies with taxpayer money. Two people familiar with his thinking say he had been leaning toward scrapping it for days before the Justice Department signaled a retreat Monday, announcing it would comply with a federal judge's order to halt any steps activating the fund until at least June 12.

The fund originated from a legally dubious arrangement: the Justice Department brokered a settlement of Trump's own $10 billion lawsuit against the IRS over the leak of his tax returns, and as part of that deal created a compensation mechanism that would draw from the Judgment Fund — an unlimited congressional appropriation meant to settle legitimate government lawsuits. The scheme quickly unraveled under scrutiny. On Friday, Judge Kathleen M. Williams, who oversaw Trump's IRS lawsuit, reopened the case entirely, citing 'grievous allegations' that the settlement had been 'premised on deception' and that Trump may have colluded with his own government to avoid judicial scrutiny. A separate federal judge in Alexandria simultaneously froze the fund pending a June 12 hearing.

The political fallout proved equally damaging. Senate Republicans — who typically fall in line behind Trump — revolted so forcefully that they abandoned plans to advance a filibuster-proof immigration funding bill rather than take what one official called a 'politically toxic vote' in support of the fund. Acting Attorney General Todd Blanche endured a contentious two-hour closed-door grilling from Republican senators last month, unable to explain how the fund would work or what guardrails would exist. Senate Majority Leader John Thune of South Dakota said Monday that the Justice Department's statement of compliance with the court order was likely insufficient to satisfy GOP senators, and when asked whether he feared a Trump veto of any legislation to kill the fund, replied simply: 'Oh yeah. Don't you?'

The fund was architected largely by Trent McCotter, the principal associate deputy attorney general, alongside Trump's outside legal adviser Boris Epshteyn, under pressure from a federal judge who had given the Justice Department a May 20 deadline to explain whether it would independently defend the IRS. That deadline sparked a scramble: officials didn't want to fight their own president's lawsuit in court, but also feared the political optics of paying Trump directly — so they invented the third-party compensation fund as a workaround.

Even with Trump backing down, the political battle isn't over. Senate Minority Leader Chuck Schumer announced a coordinated Democratic effort to 'kill the slush fund' through whatever legislative vehicle Republicans pursue. Senators Adam Schiff, Mark Kelly, and Elissa Slotkin introduced legislation to shut down the fund and restrict future abuse of the Judgment Fund. Meanwhile, Trump's allies still have other avenues to pursue government payouts — individual lawsuits or administrative claims the Justice Department could quietly settle, as it did in March when it paid $1.25 million to former National Security Adviser Michael Flynn to resolve claims of wrongful prosecution.