Site icon California Examiner

Three South Florida Men Charged in $22m Insider Trading Case Linked to Trump Media Firm IPO

Three South Florida Men Charged in $22m Insider Trading Case Linked to Trump Media Firm IPO

On Thursday, prosecutors in Florida accused three men of profiting over $22 million through unlawful insider trading in the lead-up to the announcement that an acquisition business would take former president Donald Trump’s media company public.

An indictment was unsealed in New York detailing the charges, but neither Trump nor Trump Media & Technology Group, the owners of Trump’s Truth Social platform, were named in the indictment.

Trump Media’s chances of really receiving the $1.3 billion it was promised after merging with the acquisition firm have diminished as a result of the charges. The merger won’t go through until it’s cleared by securities authorities.

The indictment states that the men were given confidential information that Trump Media was a prospective target of the special purpose acquisition business Digital World Acquisition Corp. (DWAC) and another acquisition company, Benessere Capital Acquisition Corp.

The tweet below verifies the news:

Before the Trump Media business was revealed to the public, authorities claim the defendants purchased millions of dollars’ worth of DWAC shares on the open market. According to the court documents, the men sold their stocks after the public announcement at a substantial profit.

It is not specified in the indictment how one of the defendants learned that DWAC stock was a “good bet” and “tipped off” a neighbor to make an investment in the company.

U.S. Attorney Damian Williams called insider trading “cheating” and cautioned that it “is not easy money.” “It’s a bad bet,” Williams said in a release. “Because my Office, the Southern District of New York, is watching. And we’re working quickly to investigate and prosecute anyone who corrupts our financial markets. And we’ll keep at it as long as it takes. You can bet on that.”

Michael Shvartsman, 52, of Sunny Isles Beach, Gerald Shvartsman, 45, of Aventura, and Bruce Garelick, 53, of Fort Lauderdale were the males apprehended. On Thursday afternoon, the three appeared in a Miami court for the first time and were later released on bond.

Grant Smith and Robert Buschel, two attorneys for the Shvartsman brothers, also declined to comment for this article. Michael Hursey, Garelick’s attorney, likewise chose not to elaborate.

If you are interested, the following is a list of supplementary links provided by the California Examiner:

Michael Shvartsman was the sole owner of Rocket One Capital LLC. According to court documents, Garelick served as chief investment officer for Rocket One. The indictment states that Garelick was trusted with private information while serving on the DWAC board of directors.

According to the indictment, he subsequently informed his fellow conspirators. According to the accusation, the individuals divulged the information to friends and employees between June and November 2021, who then allegedly purchased tens of thousands of securities prior to the announcement of the merger with Trump Media & Technology Group.

An SPAC is a firm that was created for the sole purpose of acquiring another business, usually a private one. According to the indictment, Trump and other Trump Media representatives started talking to Benessere principals in early 2021 about a possible merger to take Trump Media public.

Trump Media and Benessere reportedly exchanged nonbinding letters of intent to join between March and June of 2021. The indictment claims that Benessere and its representatives broke the terms of the letters’ secrecy clauses by disclosing company information to investors in the special purpose acquisition entities.

According to Jay Ritter, a stock market expert at the University of Florida who has been keeping tabs on Trump’s media endeavor, the new charges raise serious doubts about the likelihood of approval of the merger by securities regulators. However, Ritter noted that Trump’s business could be able to recruit other investors.

“Trump Media’s likelihood of being a profitable company is fairly good. This is not some pie-in-the-sky electric vehicle startup that needs to burn through millions of dollars and not come up with anything,” he said. “Some other company will come through and invest.”

Trump Media could have utilized the $1.3 billion it would not receive from the deal to fund employee salaries, office space, and business growth. If the deal doesn’t go through, DWAC will be forced to liquidate in accordance with securities regulations.

If you’re interested, check out these further links from the California Examiner:

Investors originally saw the merger as a near certainty. Many were Republican party members who were outraged that Trump had been banned from Twitter following the uprising on January 6, 2021. Truth Social was both a means of resistance to what they perceived as social media censorship and a lucrative business opportunity.

Their excitement was fueled by the widespread discussion of the new endeavor. Trump has described his startup as a “big tent” social media competitor that will provide users a platform to express themselves. Documents meant to stir investor interest in the company included competing with Netflix, Disney, and CNN in addition to Twitter as potential targets.

DWAC shares jumped from around $10 at its initial selling price to over $100 not long after the planned merger transaction was revealed in late 2021, giving the combined business a potential market value in the billions of millions.

But there were regulatory issues from the beginning. In addition to investigating alleged insider trading, securities regulators were reportedly looking into press stories that claimed DWAC officials had “substantive” negotiations with Trump Media months before DWAC sold stock to the public for the first time.

Many of Trump’s supporters, notably ex-congressman and current Trump Media CEO Devin Nunes, have repeated the president’s claims that the probes were politically motivated “witch hunts” that lacked any actual substance. As of Thursday afternoon, DWAC shares were selling for $12.70, down more than 50% in a year’s time.

How up-to-date are you on what’s been occurring in California recently? If you want to get the latest breaking news from the California Examiner, you can follow them on Twitter.

Exit mobile version