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The CEO of Trump Media urged top House committee chairmen to investigate eight financial companies over concerns about potentially illicit short sales by DJT, whose majority shareholder is former President Donald Trump.
“I believe swift action is needed to protect individual shareholders, identify wrongdoers and determine whether laws, including the Racketeer Influenced and Corrupt Organizations Act) and tax evasion laws, were raped,” wrote CEO Devin Nunes, who first asked last week. House Republicans to investigate short selling of Trump Media shares.
Nunes, in his letter dated Wednesday, wrote that the committees should seek documents and testimony from at least the eight companies he named: Apex Clearing, Clear Street, Cobra Trading, Cowen and Company, Curvature Securities, StoneX Securities, TradePro and Velocity. Clearing.
A Clear Street spokesperson declined to comment on Nunes’ letter. CNBC has requested comment from the other companies mentioned in the letter.
Nunes’ new letter steps up efforts to thwart the short selling of app owner Truth Social’s shares by encouraging shareholders to prevent their shares from being used for such transactions, and asking the Nasdaq Stock Market and the House to investigate potentially illegal “naked” short sales. sale.
Naked short sellers, unlike conventional short sellers, do not first borrow a company’s stock to sell in such transactions, which are a bet on a decline in the stock price.
Nunes suggested that the sharp drop in Trump Media’s stock price since the stock began trading on March 26 is the result of naked short selling, not a belief that the meager figure d The company’s business, of just $4.1 million last year, falls far short of justifying a market capitalization of more than $6 billion.
DJT shares were trading up 6% Thursday morning at $47.84 per share, 32% lower than its March 26 opening price.
Much of Donald Trump’s net worth is tied to his 65% stake in Trump Media, but he is currently barred from selling the shares now worth more than $5 billion until September due to a provision in the merger with a shell company that took the firm public.
Trump, who is the presumptive Republican presidential nominee, faces pending civil judgments of more than $500 million.
“Based on factors such as the volume and price of ‘locations’ purportedly available, (Trump Media) identified persistent anomalies in DJT trading,” Nunes wrote to the chairs of the Judiciary, Ways and Means, Financial Services and Oversight and Reform of the House of Representatives in its new report. letter.
“To help you determine whether DJT intraday short sales are approved in violation of Securities and Exchange Commission rules, we encourage you to seek documents and testimonials from firms (including several members of Depository Trust Company ) that facilitate short selling,” Nunes wrote in the letter, which was disclosed by Trump Media in an SEC filing on Thursday.
“In addition to requesting records and information regarding transactions in DJT, the relevant documents include compliance policies, including any policies that condone the application of a ‘multiplier’ to facilitate the lending of more shares than those actually available,” wrote Nunes, who is a former Republican congressman from California.
Nunes, in the letter, cited the fact that DJT has continuously remained on Nasdaq’s Reg SHO Threshold List since April 2, 2024.”
“An appearance on the threshold list results from persistent settlement failures and triggers … increased responsibilities for market participants,” he wrote. “For threshold securities such as DJT, the SEC guidance makes clear that the only way to establish ‘reasonable grounds’ for short sales is if the broker-dealer pre-borrows the securities; further, ” a broker-dealer cannot reapply a locate for an intraday purchase to hedge trades. “
But the SEC website notes that failure to deliver shares in a short sale, which can land a company on the Reg SHO threshold list, does not necessarily reflect improper trading activity such than a naked short sale.
“There are many justifiable reasons why broker-dealers do not or cannot deliver securities on the settlement date,” the website says of SHO settlement.
CNBC requested comment from House committee chairs on Nunes’ letter.
In a letter last month to Nasdaq’s CEO regarding possible market manipulation of Trump Media stocks through naked short selling, Nunes named four market-making firms as being responsible for more than 60% of ” of the extraordinary volume of trading in DJT shares.”
Nunes did not accuse these four companies of wrongdoing. But his use of their names drew a scathing response from one of them, Citadel Securities, whose founder Ken Griffin is a major Republican donor.
“Devin Nunes is the proverbial loser trying to blame ‘naked short selling’ for his stock price drop,” a Citadel Securities spokesperson told CNBC at the time.
“Nunes is exactly the kind of person Donald Trump would have shot on (The) Apprentice,” the spokesperson said, referring to Trump’s former business competition reality show. “If he (Nunes) worked for Citadel Securities, we would fire him, because competence and integrity are at the center of everything we do.”
In response to this, a Trump Media spokeswoman said at the time: “Citadel Securities, a corporate giant that has been fined and censored for an incredibly wide range of offenses, including questions related to naked short selling, and who is world famous for his daily mistakes. retail investors at the behest of other companies, is the last company in the world that should be lecturing anyone about “integrity.” “
– Additional reporting from CNBC Kevin Breuninger
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