DIAGNOSIS The included reusable mesh filter has holes that are too large for fine coffee grounds, especially if you use a darker roast or a finer grind. It's not a defect, it's just the nature of that style of filter.
FIX You have two options. First, try a slightly coarser grind of coffee. Second, and more effective, just switch to using standard #4 paper cone filters. They fit perfectly in the basket and will give you a clean, sludge-free brew. The machine is designed to use both.
IF THAT DIDN'T WORK If you're determined to use the mesh filter, a very coarse, French-press-style grind is your only real bet to minimize sediment.
HEADS UP That sludge isn't harmful, but it can make the last cup bitter. If you stick with the reusable filter, give the carafe a swirl before pouring to redistribute the fines and avoid a thick sludge at the bottom.