Three charged with insider trading tied to merger with Donald Trump’s Truth Social parent company
US prosecutors on Thursday charged three men with insider trading ahead of the proposed merger of former President Donald Trump’s social media company and a shell company in late 2021.
Michael Shvartsman, Gerald Shvartsman and Bruce Garelick allegedly made more than $22 million trading in Digital World Acquisition, a so-called special purpose acquisition company, or SPAC, based on tips about its planned combination with Trump Media & Technology Group.
The charges were announced by US Attorney Damian Williams in Manhattan. Neither Trump nor his company was charged. DWAC did not immediately respond to requests for comment. Grant Smith, a lawyer for the defendants, declined to comment.
Prosecutors said the alleged scheme began after the defendants invested in DWAC and Garelick became a director.
Garelick allegedly began providing the others with what he called “intelligence” about the status of merger talks and timing of a merger announcement.
The defendants then allegedly began buying DWAC securities and passed tips to others, and then sold them at a “significant profit” after the merger plans were announced.
Each defendant faces five to seven fraud and conspiracy charges that could lead to decades in prison.
The Securities and Exchange Commission filed a related civil lawsuit Thursday against the men.
It said Garelick had been chief strategy officer at Michael Shvartsman’s Miami-based venture capital firm Rocket One Capital, which placed all its trades in DWAC securities. Gerald Shvartsman is Michael Shvartsman’s brother.
The SEC complaint described a series of communications about the merger involving Garelick, including him allegedly suggesting that Michael Shvartsman buy more DWAC shares.
“FYI. I have a DWAC BOD meeting tomorrow at 12:30. I recommend starting to buy more DWACU stock,” Garelick wrote on Sept. 20, 2021. “U” stands for units.
The SEC also said that on Oct. 15, 2021, five days before DWAC announced the planned merger, a Rocket One employee emailed himself: “DWAC stock** BUY 10 unit gives you warrant and full share can’t lose money…. bought 2m warrants b/c target is trump media.”
The future of the DWAC-TMTG deal remains in doubt. If the deal closes, TMTG would gain access to over $1 billion in cash from DWAC’s institutional investors, such as hedge funds. According to a services agreement dated Feb. 2, 2021, Trump controls 90% of TMTG.
Late last year, shareholders approved extending the deadline to close the deal to September.
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.