Media partner in Trump merger discloses $18 million preliminary settlement with SEC

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The blank-cheque company planning to bring Donald Trump’s media business to the stock market announced that it has reached a settlement of $18mn regarding a regulatory investigation. The investigation was focused on certain disclosures related to the company’s initial public offering and its proposed merger with Trump Media & Technology Group.

Digital World Acquisition Corporation, in a filing on Monday, stated that it has reached “an agreement in principle” with the US Securities and Exchange Commission’s division of enforcement. However, this settlement is subject to SEC approval and will only be paid if the merger with Trump Media & Technology Group is finalized.

As part of the agreement, DWAC will enter into a cease-and-desist order, acknowledging the company’s violation of certain antifraud provisions. The violations concern statements, agreements, and omissions made in connection with the IPO and discussions with TMTG regarding the proposed business combination.

The SEC had been investigating whether DWAC violated securities laws by engaging in talks with TMTG before going public. Typically, special purpose acquisition companies (Spacs) like DWAC are required to disclose such discussions to investors prior to their market debut.

DWAC became a listed company in September 2021 and soon after announced its merger with TMTG, which operates Trump’s Truth Social media platform. However, a whistleblower complaint filed by a former executive at Trump’s media group raised allegations of “fraudulent misrepresentations” by the Spac regarding their discussions with the former president’s business prior to the IPO.

A settlement with the SEC could remove a significant hurdle for the DWAC-TMTG deal, but recent indications suggest disagreements between the two parties themselves.

DWAC is seeking approval from shareholders to extend the deadline to complete the transaction by one year, but TMTG has informed the company that it is only bound by the terms of the merger agreement until the current deadline, according to the filing.

The Spac also noted that there have been delays in providing various deliverables required to finalize the business combination from Trump’s business.

The SEC has not yet responded to a request for comment on the potential settlement.

Recently, three individuals associated with DWAC, including a former board member, were charged with insider trading by the US attorney in Manhattan. The SEC has also filed a civil claim against these individuals, citing communications from as early as June 2021 referring to DWAC as the “Trump Spac”.

Additional reporting by Stefania Palma in Washington