Trump Media SPAC insider trading charges by DOJ, SEC

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The former US President announced his intention to create a new social media platform after he was banned from Facebook and Twitter last year.

Leon Neal | Getty Images

WASHINGTON Three Florida men were charged Thursday with insider trading in the stock of a shell company before it announced plans to merge with a social media firm launched by former President Donald Trump.

The men, Michael Shvartsman, Gerald Shvartsman and Bruce Garelick, allegedly made more than $22 million in illicit profits from trading Digital World Acquisition Corp. shares.

All three were arrested Thursday morning, the Justice Department said.

The Securities and Exchange Commission also filed a civil complaint against Garelick, who is a board member of DWAC, the Shvartsmans, who are brothers, and Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman.

The charges do not allege wrongdoing by Trump or any of his family members.

A spokesperson for TMTG did not respond to a request for comment about the allegations.

The DOJ announced charges related to the proposed Trump Media merger as part of a series of allegations of illegal trading. They include accusations that two Pfizer employees traded on non-public information about trial results for its Covid treatment Paxlovid.

Digital World Acquisition Corp. is a special purpose acquisition company, or SPAC, that announced plans to merge with Trump Media & Technology Group in October 2021. The SPAC merger aims to help TMTG go public without the lengthy process of a formal IPO.

Two investors and one board member

The insider trading complaints allege that Garelick and the Shvartsmans signed investor confidentiality agreements with DWAC in June of 2021, after which they were told about plans to merge with Trump Media. At the time, Garelick was working for Rocket One Capital.

The following month, Garelick joined the DWAC board. As an official, Garelick was privy to more non-public information than the Shvartsmans. He specifically received updates on conversations underway between DWAC and Trump Media, the government said.

Prosecutors say Garelick shared this detailed information with his boss, Michael Shvartsman, who then revealed it to his brother, Gerald. Throughout September and October of 2021, the three men repeatedly bought DWAC stock.

In the first day after news of the planned Trump merger broke, DWAC shares soared 450%. At one point the next day, the stock was worth more than 1,000% of the stock price before the news.

Garelick and the Shvartsmans sold all of their DWAC shares in the first two days after the merger announcement.

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No merger yet

As of Thursday, more than 18 months after the heady days of DWAC’s brief ascension, the promised merger had yet to happen.

Instead, DWAC has struggled to raise money from investors amid multiple federal investigations into its practices and its funding.

The company first disclosed that it was under investigation by the Securities and Exchange Commission in a June 2022 filing. A week later, Trump’s media company was subpoenaed by a grand jury in connection with the DWAC investigation. .

TMTG includes Truth Social, the social media platform Trump launched after Twitter banned him for his tweets on January 6, 2021, when hundreds of his supporters stormed the US Capitol.

DWAC shares closed at $12.66 on Wednesday. The stock has been falling since it hit a closing high of $94 on Oct. 22, 2021, after announcing the planned merger with Trump’s media group.

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