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An individual involved in the initial public offering of Donald Trump’s media business has been arrested for insider trading. It is alleged that Bruce Garelick, a member of Digital World Acquisition Corporation’s board of directors, shared information about the transaction while in Las Vegas, enabling two associates to make $22.8 million in unlawful trades. The US attorney’s office in Manhattan has filed criminal charges against Garelick, as well as brothers Michael Shvartsman and Gerald Shvartsman, with the Securities and Exchange Commission also making a civil claim against the trio.
Following the announcement of its merger with Trump Media & Technology Group, which operates the Truth Social media platform, DWAC experienced a significant rise in stock market performance. Starting at around $10, the share price soared to a high of $175 in October 2021. However, the planned deal with TMTG has since faced delays due to ongoing regulatory investigations.
Court documents reveal that Garelick and the Shvartsmans purchased DWAC shares months before the announcement of the Trump deal and quickly sold them, resulting in substantial profits. Prosecutors allege that Garelick, who also held the position of chief strategy officer at Rocket One Capital, an investment firm run by Michael Shvartsman, shared information on the progress of DWAC’s merger with TMTG with the Shvartsman brothers. Garelick also encouraged them to purchase warrants, which later experienced a sharp increase in value.
Lawyer Grant Smith, representing the Shvartsmans, declined to comment on the matter. Garelick’s lawyer has yet to respond to requests for comment. The SEC has cited text messages and emails from Garelick that indicate his anticipation of a deal with Trump, months before any official announcement was made.
In June 2021, Garelick sent an email seeking investments in what he referred to as “[the] Trump Spac”.
“You might find this interesting,” Garelick later told his daughter. “Your dad might be named to the ‘Trump Media Group’s Board of Directors’.”
In another message, Garelick described his potential position on the DWAC board of directors as a “front row seat babysitting job” that was “well worth it for an unconventional investment like this”.
In an August 2021 filing with the SEC, DWAC informed investors that it had yet to finalize a specific business combination target.
Gurbir Grewal, the SEC’s director of enforcement, stated, “As a board member, Garelick not only had access to information about DWAC’s upcoming merger announcement, but also a duty to maintain the confidentiality of that information. Instead of fulfilling his duty as an insider, we allege that Garelick, along with the Shvartsmans, exploited that information to generate over $20 million in illicit profits.”
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