US district judge Shirley Wohl Kram has accepted AOL's $2.65bn class action settlement to shareholders.
The offer was made to appease an estimated 600,000 shareholders who were angry over AOL's merger with Time Warner, claiming that AOL had over-estimated how much advertising revenue it was taking.
The ruling comes after seven months of negotiations between lawyers for both parties and a 'special master' appointed by the court.
Time Warner will pay out the majority of the cash, while its auditor Ernst & Young will pay out around $100m.
The Time Warner/AOL merger took place in 2000, and the shareholders brought the case following complaints that AOL had inflated its advertising revenue figures between 1998 and 2002.
The largest claim was from the Minnesota State Board of Investment which estimated that it lost $249m from the $50bn retirement funds it manages for various workers in Minnesota.
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