DWAC: Federal Prosecutors Arrest Three Investors in Trump SPAC Deal Insider Trading Scandal

Federal prosecutors have taken action by arresting three investors on charges of insider trading linked to a deal aimed at making former US President Donald Trump’s media business public. The indictment alleges that these individuals collectively earned over $22 million in October 2021 through illegal trading based on undisclosed information about Digital World Acquisition Corporation’s confidential plan to acquire Trump Media & Technology Group, the owner of Truth Social.

The defendants are accused of sharing this privileged information with friends and colleagues who also invested in Digital World prior to the public announcement of the blank-check firm’s Trump Media deal. Subsequently, when the deal was officially revealed, the value of these securities surged. The defendants and those they tipped off sold their shares at a substantial profit, as detailed by prosecutors.

Among those indicted are Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick, who held a position on Digital World’s board of directors. All three individuals have surrendered to authorities and are scheduled to appear in a federal court in Miami later today, according to a law enforcement official.

In addition to the criminal charges, the Securities and Exchange Commission (SEC) has filed civil insider trading charges against the three investors. It’s important to note that there are no allegations of Trump’s involvement in the alleged insider trading, and Trump Media has not provided any comments on the matter despite requests for a statement.

These latest charges further compound the controversies surrounding the Trump deal, attracting scrutiny from legal experts, regulators, and prosecutors alike. Despite being announced almost two years ago, the merger has yet to be finalized, and just last month, the Nasdaq stock exchange threatened to delist Digital World due to its failure to file its quarterly report.

According to the indictment, the defendants disclosed Digital World’s confidential information to acquaintances during a trip to Las Vegas, to Michael Shvartsman’s neighbors, and to Gerald Shvartsman’s employees at a furniture supply store. These contacts collectively purchased tens of thousands of securities ahead of the merger announcement.

Prosecutors claim that the defendants were invited to invest not only in Digital World but also in another special purpose acquisition company (SPAC). After signing non-disclosure agreements, they were provided with confidential information indicating that Trump Media was a potential target for these SPACs. Furthermore, Garelick, who held a position on Digital World’s board, possessed additional insight into the SPAC’s confidential merger plans with Trump Media.

Allegedly violating their non-disclosure agreements, the defendants bought millions of dollars worth of Digital World securities on the open market and shared the inside information with other associates who also purchased securities before the public announcement of the Trump Media merger, as outlined in the indictment.

Following the news of the Trump Media merger, Digital World shares experienced a significant surge, with investors perceiving it as an opportunity to capitalize on the former president’s prospects.

Gurbir Grewal, the director of the SEC’s division of enforcement, stated, “Instead of fulfilling their duty as insiders, we allege that Garelick, along with the Shvartsmans, exploited that information to generate over $20 million in unlawful profits.” He emphasized that this case highlights the SEC’s unwavering commitment to exposing insider trading, including in SPAC mergers.

Information for this story was found via CNN and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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