One board member and two executives have just been charged with illegal trading by the Justice Department. The illegal trading occurred ahead of an acquisition of Trump’s parent company to Truth Social.
JUST IN: Insider trading charges filed against executives at company tied to Trump's Truth Social https://t.co/2HRYZhueZQ pic.twitter.com/Lgz8e3SiO4
— The Messenger (@TheMessenger) June 29, 2023
Here’s more:
Federal prosecutors filed insider trading charges against one former board member and two other executives tied to former President Donald Trump’s social media platform Truth Social.
The company, Digital World Acquisition Corp., disclosed last year that it was under criminal and civil investigation by the Justice Department and the Securities and Exchange Commission. DWAC is a special purpose acquisition company, or so-called blank check company, that was in the process of acquiring The Trump Media & Technology Group. The group owns and operates Truth Social, a Twitter alternative launched by Trump after he was banned from the platform in 2021.
The deal would have made Trump’s media group a publicly traded company with access to more than $1 billion in capital.
The U.S. said Michael Shvartsman, Gerald Shvartsman and Bruce Garelick made more than $22 million in illegal profits by trading in DWAC securities before the announcement of its planned acquisition of Trump’s media company.
Garelick was on DWAC’s board of directors until he resigned during the investigation last year.
The Shvartsmans and Garelick, all of Florida, were arrested Thursday morning.
SPACs are shell companies with no operations which raise money from investors to find acquisition targets. Investigators were scrutinizing whether DWAC already had plans to acquire Trump’s social media operations before that was disclosed to investors, as well as a surge in trading of securities tied to the company before the deal was announced.
In their write up, CNBC pointed out that the DOJ “does not allege wrongdoing by Trump or any of his family members.”
Here’s part of the DOJ’s write up which makes some of this more clear:
In October 2021, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK together made more than $22 million dollars in illegal profits by trading in securities of Digital World Acquisition Corporation (“DWAC”) based on MNPI about DWAC’s planned but not yet public business combination with a media company founded by former President Donald J. Trump.
As sophisticated investors, MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK were invited to invest in DWAC and another special purpose acquisition company (“SPAC”), and after signing non-disclosure agreements, they were provided confidential information about the SPACs, including that a potential target of the SPACs was Trump Media & Technology Group (“Trump Media”). As a condition of receiving this information, the defendants were prohibited by the non-disclosure agreements from disclosing the confidential information they learned or using it to buy and sell securities on the open market. After making initial investments into DWAC through the initial public offering process, GARELICK was given a seat on DWAC’s board of directors, which gave him access to valuable MNPI about DWAC’s plans to merge with Trump Media. After learning MNPI through his role on DWAC’s board, GARELICK provided updates to his alleged co-conspirators — which he called “intelligence” — about the status of the merger negotiations and the timing of a public merger announcement.
In violation of the non-disclosure agreements that they had signed, and in contravention of GARELICK’s duties and responsibilities as a board member, the defendants bought millions of dollars of DWAC securities on the open market before the news of the Trump Media business combination was public. In addition to their own purchases, the defendants also passed DWAC’s confidential information to their friends on a trip to Las Vegas, to MICHAEL SHVARTSMAN’s neighbors, and to GERALD SHVARTSMAN’s employees at a furniture supply store. After DWAC’s merger with Trump Media was announced publicly, the stock and warrant holdings of MICHAEL SHVARTSMAN, GERALD SHVARTSMAN, and BRUCE GARELICK, and those they tipped, significantly increased in value. The defendants and the individuals they tipped then sold their DWAC securities for a significant profit.
It doesn’t sound like any of these investors worked for Trump Media and that all of this inside trading was happening through DWAC.