Former President Donald Trump, who was banned from Facebook and Twitter last year, has announced his plan to create a new social media platform. However, three Florida men have been charged with insider trading of a shell company’s stock before it revealed its merger plans with Trump’s social media firm. These men, Michael Shvartsman, Gerald Shvartsman, and Bruce Garelick, allegedly made over $22 million in illicit profits from trading shares of Digital World Acquisition Corp. They were arrested by the Justice Department.
In addition, the Securities and Exchange Commission has filed a civil complaint against Garelick, the Shvartsmans, and Rocket One Capital LLC, a venture capital firm owned by Michael Shvartsman. It’s important to note that the charges do not implicate Trump or his family members.
The Department of Justice has made these charges as part of a wider crackdown on illegal trading. The charges also include allegations against two Pfizer employees who traded on nonpublic information about the trial results for their Covid treatment, Paxlovid.
Digital World Acquisition Corp. is a special purpose acquisition company (SPAC) that aimed to merge with Trump Media & Technology Group (TMTG) in October 2021, allowing TMTG to go public without the lengthy process of a formal IPO.
The insider trading complaints reveal that Garelick and the Shvartsmans signed investor confidentiality agreements with DWAC in June 2021 and were informed about the merger plans with Trump Media. Garelick joined the board of DWAC the following month, gaining access to even more nonpublic information. Prosecutors claim that Garelick shared this information with his boss, Michael Shvartsman, who then shared it with his brother, Gerald. The three men bought DWAC stock repeatedly in September and October 2021.
After news of the planned merger broke, DWAC stock skyrocketed by 450% on the first day and reached more than 1,000% of the pre-news stock price the following day. Garelick and the Shvartsmans sold all their DWAC shares in the first two days after the merger announcement.
As of now, the promised merger between DWAC and Trump Media has not taken place. DWAC has faced difficulties in raising funds due to ongoing federal investigations into its practices and funding. The company disclosed its SEC investigation in June 2022, and a week later, Trump’s media company was subpoenaed by a grand jury in connection with the DWAC probe.
It’s worth mentioning that TMTG includes Truth Social, the social media platform Trump launched after being banned from Twitter following his controversial tweets on January 6, 2021, when his supporters stormed the U.S. Capitol.
DWAC shares closed at $12.66 on Wednesday, experiencing a decline since its closing high of $94 on October 22, 2021, when the merger with Trump’s media group was announced.
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