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The Special Purpose Acquisition Company (SPAC) that aims to take Donald Trump’s media business public has agreed to pay an $18 million penalty to the Securities and Exchange Commission (SEC) in the event of the deal’s completion. This agreement, announced on Thursday, settles the fraud charges against Digital World Acquisition Company (DWAC).
In September 2021, DWAC became a listed company without disclosing its ongoing discussions to acquire Trump Media and Technology Group (TMTG), the operator of the Truth Social platform. The SEC found that DWAC’s securities filings at the time of its initial public offering contained false information and violated federal securities laws.
Gurbir Grewal, the SEC’s Chief of Enforcement, revealed that DWAC’s CEO and chairman failed to disclose a significant conflict of interest. The SEC also uncovered an obligation for the CEO to pay TMTG $1 million if the media venture failed to secure a merger partner.
Special Purpose Acquisition Companies like DWAC typically go public with the intention of later merging with established companies, offering a fast-track to a public listing. DWAC initially gained popularity following its announcement to merge with TMTG in October 2021.
However, the deal has since faced numerous challenges, including regulatory investigations and difficulties in obtaining approval from the company’s retail shareholders. The SEC began investigating the deal in December 2021.
In a separate incident, federal prosecutors recently charged Bruce Garelick, a former member of DWAC’s board of directors, with insider trading. DWAC itself has not been implicated in the investigation.
Following news of the SEC settlement, DWAC shares rose nearly 30% in after-hours trading on Thursday. However, the shares have declined by approximately 80% since reaching their peak in March 2022.
DWAC is required to complete the transaction by September or return the cash to its shareholders. The company has requested an extension of the deadline, but TMTG has stated that it is only bound by the terms of the merger agreement until the current deadline.
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