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Against an avalanche of investigations surrounding Donald Trump, there’s the other one that’s easy to forget: Federal officials, including the Securities and Exchange Commission, have spent months examining a pending deal between Trump’s media company and a special purpose acquisition company.
In fact, as CNBC reported this morning, there have been some developments in the probe.
Three Florida men were charged Thursday with insider trading of a shell company’s stock 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 netted more than $22 million in illicit profits from trading in shares of Digital World Acquisition Corp
The same report added that the Securities and Exchange Commission also filed a civil complaint against the trio — including Garelick, a DWAC board member — as well as Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman.
According to prosecutors, this appears to be a relatively straightforward case of alleged insider trading: Garelick and the Shvartsmans had non-public information, including updates on DWAC’s plan to buy Trump Media & Technology Corp., and they allegedly used that information in their lucrative investment strategies.
There’s nothing to suggest the charges relate to the former president himself.
That said, it’s not the only discouraging headline surrounding the process. Today’s news, for example, comes a month after Forbes reported that the company planning to merge with Trump Media & Technology Group informed the Securities and Exchange Commission that its financial statements through 2022 should not be relied upon due to an error “accounting for certain expenses.”
The report added, “Digital World Acquisition Corp. also revealed that, for the second time, it is at risk of being delisted from NASDAQ for failing to file a mandatory report.”
Two weeks earlier, The Washington Post reported that if DWAC and the Trump Media & Technology Corp. complete their deal, “an obscure financial entity with connections to a Caribbean-island bank that bills itself as a top payment service for adult entertainment sites would gain a sizable stake” in the former president’s media company.
The report added that the entity — the ES Family Trust — had not officially disclosed the role it would assume in the Trump Media and Technology Group. The Post went on to report that the companies “also have not disclosed to shareholders or the SEC that Trump Media paid a $240,000 finder’s fee for helping to arrange the $8 million loan deal with ES Family Trust — or that the recipient of that fee was an outside brokerage associated with Patrick Orlando, then Digital World’s CEO.”
I have a hunch some readers are saying right about now, “Um, Steve, I have no idea what you’re writing about.”
So, let’s recap for those just joining us. It was nearly two years ago when the former president and his team launched the Trump Media & Technology Group, which appeared to have bold, multimedia ambitions: It said it intended to compete with both Twitter and Netflix. To that end, the operation even hired a high-profile CEO: Former House Intelligence Committee Chairman Devin Nunes, despite his lack of media experience, announced he’d resign from Congress to lead the nascent company.
It hasn’t exactly been smooth sailing. The Twitter-like Truth Social app was plagued by technical difficulties and missed deadlines. Some top executives’ resignations made matters worse, and there’s little to suggest the platform is gaining traction in any meaningful way.
But the most dramatic problem relates to the venture’s financing.
Because the former president has a history of bankruptcies and loan defaults, he couldn’t simply go to a major American financial institution to help bankroll his media venture. So, Trump agreed to merge his operation with a special purpose acquisition company (SPAC), called Digital World Acquisition Corp. As The New York Times reported a while back, “To get his deal done, Mr. Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters.”
Investigators' interest soon followed.
As for why all of this matters, Trump really wants this deal to work out. Axios reported last year, “Truth Social’s financial prospects are heavily reliant on investment tied to the merger.”
Whether the merger will ever happen remains uncertain. CNBC’s report added, “As of Thursday, more than 18 months after the heady days of DWAC’s brief surge, the promised merger had not happened yet. Instead, DWAC has struggled to raise money from investors amid multiple federal investigations into its practices and its funding.”
This post updates our related earlier coverage.