Prosecutors charge 3 investors with insider trading in the Trump SPAC deal. Legal action is taken against individuals involved in illegal trading.
Prosecutors Charge Three Investors with Insider Trading in Trump SPAC Deal
Federal prosecutors have apprehended three investors, charging them with insider trading in connection to a deal involving the public listing of former President Donald Trump's media business.
Uncovering Illegal Profits
The defendants allegedly leaked this confidential knowledge to their friends and colleagues, who subsequently acquired securities in Digital World before the company's Trump Media deal was made public. Following the announcement of the deal, the value of these securities experienced a significant surge. Consequently, the defendants and their accomplices sold their securities, reaping substantial profits.
The Defendants and Charges
The indictment identifies the three individuals charged as Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick. Notably, Bruce Garelick served as a director on Digital World's board of directors. All three defendants have willingly surrendered to authorities and are expected to make their appearance in federal court in Miami later today, as confirmed by a law enforcement official.
Furthermore, the Securities and Exchange Commission (SEC) has filed civil charges against the three investors for insider trading.
No Involvement of Donald Trump
It is important to note that these charges of insider trading do not implicate Donald Trump in any way. Trump Media has chosen not to respond to the request for comment.
However, the introduction of these new charges further adds to the ongoing controversy surrounding the Trump deal, attracting attention from legal experts, regulators, and prosecutors alike.
The Lengthy Merger Process
Nearly two years after its initial announcement, the merger between the two entities remains incomplete. Last month, the Nasdaq stock exchange even threatened to delist Digital World due to its failure to submit its quarterly report.
Sharing Confidential Information
According to the indictment, the defendants shared Digital World's confidential information with various contacts. This included disclosing the information during a trip to Las Vegas, Michael Shvartsman's neighbours, and Gerald Shvartsman's employees at a furniture supply store. In total, these contacts collectively purchased tens of thousands of securities in advance of the merger announcement.
Insights and Non-Disclosure Agreements
The indictment reveals that the three defendants were offered investment opportunities in Digital World, as well as another special purpose acquisition company (SPAC). Upon signing non-disclosure agreements, the defendants gained access to confidential information indicating that Trump Media was a potential target of the SPACs.
Furthermore, Bruce Garelick, with his position on Digital World's board of directors, obtained additional insight into the SPAC's confidential merger plans with Trump Media. Garelick shared what he referred to as "intelligence" about the Trump merger negotiations and the timing of the public merger announcement with his co-conspirators.
Violation of Non-Disclosure Agreements
In clear violation of the non-disclosure agreements they had signed, the defendants purchased millions of dollars worth of Digital World securities on the open market. They also shared the inside information with their associates, who also acquired securities before the public announcement of the Trump Media merger, as outlined in the indictment.
Market Reaction and SEC's Stance
Following the news of the Trump Media merger, Digital World's shares experienced a tremendous surge, as investors viewed it as an opportunity to speculate on the success of the former president.
Gurbir Grewal, the director of the SEC's division of enforcement, expressed, "Instead of fulfilling their duty as insiders, we allege that Garelick, together with the Shvartsmans, capitalized on that information, generating over $20 million in illegal profits. This case exemplifies the SEC's unwavering commitment to exposing insider trading wherever it occurs, even in SPAC mergers."
