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Two Florida brothers pleaded guilty Wednesday in New York federal court to insider trading charges related to their buying and selling of securities in the company that eventually merged with former President Donald’s social media company Trump.
The brothers, Michael Svhartsman and Gerald Shvartsman, made more than $22 million in illegal profits trading in securities of the shell company Digital World Acquistion Corp., in October 2021, after learning non-public information that DWAC was planning a merger with the private company. detained Trump Media and Technology Groupprosecutors said.
Although this merger was announced in late October 2021, it was only finalized last month in a deal that led to Trump Media becoming a publicly traded company.
A third defendant in the case, former DWAC board member Bruce Garelick, has pleaded not guilty to securities fraud charges that allege he also purchased DWAC securities on the open market after having become aware of non-public information on the proposed merger.
Garelick, who had also been chief strategy officer of Rocket Capital, Michael Shvartsman’s Miami-based venture capital firm, is scheduled to go on trial in Manhattan federal court at the end of April.
No one associated with Trump Media, which owns the Truth Social app, has been accused of wrongdoing in the case.
Michael Shvartsman, 53, and Gerald Shvartsman, 46, owner of a furniture manufacturing company, are scheduled to be sentenced July 17 by Judge Lewis Liman in Manhattan federal court.
Federal sentencing guidelines recommend that Michael Shvartsman, who made $18.2 million in illegal business profits, be sentenced to 41 to 51 months in prison, according to his plea agreement.
Sentencing guidelines recommend that Gerald Shvartsman, who made approximately $4.6 million in illegal business profits, be sentenced to between 33 and 41 months in prison.
Liman is not required to sentence the brothers under the guidelines, which also recommend that each of the men be fined between $15,000 and $5 million.
As part of his plea deal, Michael Shvartman also agreed to forfeit $18.2 million to the federal government, as well as any right or title to a $14 million luxury yacht named “Provocateur » and his three jet skis, which were purchased with profits from trade. .
“Insider trading is cheating, pure and simple, and today’s sentences should serve as a reminder to anyone who might be tempted to corrupt the integrity of the stock market that doing so will earn them a prison sentence,” the prosecutor said American, Damian Williams, in a statement after the decision. the brothers pleaded guilty.
In 2021, the Shvartsmans had been invited to invest in DWAC and another so-called special purpose acquisition company, and after signing nondisclosure agreements, they received information that Trump Media was a potential target of a merger plan, according to an indictment.
These agreements prohibited the brothers from using this information to purchase securities related to the transaction.
“Defendants also informed others of the upcoming merger, inducing further trading in DWAC securities based on the (confidential information) they had obtained subject to their nondisclosure agreement and through the intermediary” of an associate, Garelick, who had been placed on the DWAC site. board of directors, the Manhattan U.S. Attorney’s Office said in a statement.
Trump Media mentioned the criminal case in a regulatory filing Monday.
“These individuals have no affiliation with TMTG and – based on our information and belief – TMTG is not the target of any DOJ (Department of Justice) enforcement action,” the company said in the filing. with the Securities and Exchange Commission.
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