Three Men Charged in $22 Million Insider Trading Scheme Related to Trump Media Merger

Three Men Charged in $22 Million Insider Trading Scheme Related to Trump Media Merger | The Entrepreneur Review

Federal authorities have charged three individuals in connection with an insider trading scheme involving the proposed merger of former President Donald J. Trump’s social media company and a cash-rich public shell company. The arrests came after an extensive investigation by federal prosecutors in Manhattan into trading in the securities of Digital World Acquisition Group, a special purpose acquisition company (SPAC). The case primarily focuses on Rocket One Capital, a Miami-based venture capital firm led by Michael Shvartsman.

The Charges

The charges were brought against Michael Shvartsman, his brother Gerald, and Bruce Garelick, a former hedge fund manager who previously worked at Rocket One and served as a board member of Digital World before resigning in the summer of 2021. The three individuals are accused of engaging in improper trading and violating nondisclosure agreements related to the pending merger between Digital World and Trump Media & Technology Company, the parent company of Truth Social, a right-leaning social media platform.

Notably, the individuals arrested have no direct connection to Donald J. Trump or anyone associated with Trump Media & Technology Company, according to an anonymous source familiar with the matter. The charges do not implicate either Digital World or Trump Media with any wrongdoing.

The investigation revealed that Rocket One and individuals associated with Michael Shvartsman had invested in Digital World prior to the SPAC going public. Subsequently, some Rocket One employees began referring to Digital World as the “Trump SPAC.” The defendants are alleged to have violated nondisclosure agreements by discussing the pending deal with others and providing tips about the merger between Digital World and Trump Media.

The Merger with Trump Media

The merger between Digital World and Trump Media has faced various challenges, including investigations into potential violations of federal securities laws and insider trading. The Securities and Exchange Commission (SEC) has been scrutinizing the preliminary merger discussions between the two companies. Additionally, the clock is ticking to finalize the deal before September 8, when Digital World would be obligated to liquidate and return the raised funds to shareholders.

The SEC filed a lawsuit against the Shvartsman brothers and Garelick, naming Rocket One as a defendant as well. The lawsuit includes a text message from Garelick to his daughter, where he mentions the possibility of being named to the “Trump Media Group’s Board of Directors.”

Other Insider Trading Cases

Apart from this case, federal prosecutors and the SEC have filed several other insider trading cases, including charges against a former Pfizer employee and his friend for trading ahead of positive news about Pfizer’s Covid-19 drug, Paxlovid.

Insider trading is a serious offense, and these cases highlight the commitment of authorities to prosecute individuals involved in such illegal activities. Damian Williams, the U.S. attorney for the Southern District of New York, emphasized that insider trading is a form of cheating and not a quick or legitimate way to make money.

The arraignment for the three individuals charged in the Digital World case is pending, and investigations related to the merger are ongoing.

Source: The New York Times
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