Investors Accused of Insider Trading in Trump Media Merger Deal

In a statement released by the Southern District of New York, Bruce Garelick, Gerald Shvartsman, and Michael Shvartsman were apprehended in South Florida on Thursday morning. They face numerous charges of securities fraud. Simultaneously, the Securities and Exchange Commission has filed a lawsuit against them for engaging in insider trading.

Having received insider information in September 2021 regarding the finalized merger plans between Digital World Acquisition and Trump Media & Technology Group, the trio made illicit trades, amassing millions of dollars. It was only a month later when the news was made public.

Following the official announcement, the stock price experienced an astonishing surge, reaching an all-time high of $175 per share. Capitalizing on this opportunity, the individuals sold their shares, yielding a substantial profit. However, the fortunes of Digital World took a nosedive, with the shares currently valued at approximately $12 per share. The merger between Digital World and Trump Media remains pending due to ongoing investigations by federal authorities.

Neither Trump himself nor his company faced accusations of wrongdoing by the SEC. Furthermore, Truth Social's ownership entity remained untouched.

According to SEC regulations, SPACs generally refrain from engaging in substantive discussions with a potential merger target before initiating an initial public offering. In its IPO filing with the SEC in September 2021, DWAC explicitly stated that it had not made any selection or held any substantive discussions, directly or indirectly, with any business combination target.

According to the Securities and Exchange Commission (SEC), the alleged insider trading carried out by the venture capitalists in this particular case is particularly reprehensible. This is due to the fact that Garelick, who served on the board of directors at DWAC, a company specifically established to merge with Trump's social media venture, was involved. The three individuals were aware of the merger plan before the general investment community and purportedly took advantage of the situation by acquiring hundreds of thousands of shares prior to the official announcement, enabling them to profit from it later.

Gurbir Grewal, the Director of the SEC's Division of Enforcement, stated in a press release, "This case exemplifies the Commission's unwavering dedication to uncovering instances of insider trading, regardless of their location."