The Securities and Exchange Commission (SEC) announced on Thursday that Digital World Acquisition Corp. (DWAC), the investment company that planned to merge with Trump Media & Technology Group (TMTG), the parent company of former President Trump’s Truth Social app, has been fined $18 million. This comes after DWAC raised approximately $300 million in 2021 and made misleading disclosures to investors about the merger.
While the merger is still pending, the settlement of the SEC matter paves the way for its completion. If the merger does not conclude by the September 8 deadline, the $300 million raised will be returned to investors.
DWAC is a special purpose acquisition company (SPAC), a type of blank-check firm that can acquire and assist in taking a company public. The SEC alleges that DWAC had plans to acquire the Trump company before raising funds through its IPO but failed to disclose this information to investors as required.
Gurbir Grewal, the SEC’s enforcement director, stated that DWAC “failed to disclose its discussions with TMTG and failed to disclose a material conflict of interest of its CEO and Chairman.” He further emphasized the importance of accurate disclosures in SPACs, as investors heavily rely on information about the SPAC’s management team and potential merger targets when making financial decisions.
If the merger proceeds, DWAC will have to pay the $18 million fine. The SEC initiated the investigation following DWAC’s announcement of its intention to merge with the Trump media company in 2021.
In a separate development, three DWAC investors were charged with insider trading in June, allegedly making $22 million in profits by using privileged information related to the merger deal.
It’s important to note that Trump Media & Technology Group, owned by Trump and managed by former Rep. Devin Nunes (R-Calif.), has not been implicated in either of the investigations.
In conclusion, DWAC has been fined $18 million by the SEC for misleading investors in connection with its planned merger with TMTG. The completion of the merger is now dependent on meeting the September 8 deadline, failing which the raised funds will be returned to investors. The SEC’s investigation also uncovered insider trading by certain DWAC investors. However, Trump Media & Technology Group has not faced any accusations of wrongdoing.
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